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Author: 

King Edwards's Hospital 
Fund for London 

Title: 

Pensions for hospital 
officers and staffs 

Place: 

London 

Date: 

[1919] 



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King Edward's hospital fund for London. 

Pensions for hospital officers and staffs. Eeport of a 
sub-committee of the Executive committee of King Ed- 
ward's hospital fund for London ... London, C. & E. 
Layton [etc., 1919] 

V. 273 p. 33i"-. 

"Report signed by Mr. W. J. H. Whittall, chairman, and Mr. H. L. 
Hopkinson." 

1. Pensions-Gt. Brit. 2. Hospitals-Gt. Brit i Whittall, William 

Joseph Hutchings. 1857- n. Hopkmson, Henry Lennox, 1855- 

m. Title. 



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Priee-SEVEN SHILLINGS AND SESPENCE, Net. 



PENSIONS FOR HOSPITAL OFFICERS 

AND STAFFS. 



REPORT 



OF 



A SUB-COMMITTEE OF THE EXECUTIVE COMMITTEE 



OP 



KING EDWARD'S HOSPITAL FUND FOil LONDON 







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HonDion: 

C. A E. LAYTON. 56, FAKRINGDON STREET. B.C.4. 
GEO. BARBER, 23. FURNIVAL STREET, HOLBORN. E.C 4. 

1919. 



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KING EDWARD'S HOSPITAL FUND 
FOR LONDON. 

fincorpotntcd bij Act of J'nrliniiicuf, 1907.) 



Patron: HIS majesty the king. 



OOVCRNORS : 

THE MARQUCSS OF CAMBRIDGC. THE VISCOUNT IVEAQH, 

THE SPEAKER OF THE HOUSE OF COMMONS. 

CONSTITUTION. 

The Fund was founded in 1897 by His late Majesty 
Kin;t Edward VII, then Prince of Wales, with the object 
of securing more efficient aid and support for the 
Hospitals of London, and of tiius commemorating the 
Sixtieth Anniversary of the Reign of Her Majesty Queen 
Victoria, by establishing the voluntary hospital system 
of London on a sound financial basis. 

King Edward VII was President, while Prince of 
Wales, from 1897 to 1901, and was subsequently Patron 
during his reign from 1901 to 1910. 

His present Majesty, King George V, was President, 
as Prince of Wales, from 1901 to 1910, and is now Pa:tron 
of the Fund. 

By desire of King Edward, the Fund was incorporated 
in 1907 by Act of Parliament, in accordance with the 
provisions of which the powers of President have been, 
since 1910, exercised by the thro^ Governors wiiose 
names are giv'en above. 

The Fund is managed by a General Council and four 
Committees, viz. : — the Executive, Finance, Distribution, 
and Convalescent Homes Committees. 

All communications should be addressed to the 
Honoraiy Secretaries, King Edward's Hospital Fund, 
7, Walbrook, E.C. 4. 



March, 1919. 



[OVER 



V 





KING EDWARD'S HOSPITAL FUND FOR LONDON. 

METHODS AND RESULTS. 

Uuder tlie active personal supervision of its Royal Presidents, the Fund has prown steadily in the scope of 
Its work and has secured in an increa^in- degree the confidence and support of the puhlic. 

^^\TorT ^''^"''^"'"^ '^> ^''^ ^""^1 ''^ 1918 was £200.000. l>eing an increase of £10.000 over tlie previous 
J ear. and £12,o00 over the maxinmtn in the years immediately preceding the war. 

During the twenty-two years of its existence the Fund has distril,ute<l £2.058.410 to London Hospitals, and 
to Consumption Sanatoria and Convalescent Homes taking London patients. 

The amount spent annually on adniinistration since the foundation of the Fund has averaged £1 4s lid per cent 
of the receipts ; which is equal to less than 3d. of every £1 received. f ■ 

The League of Mercy, founded under Royal Clmrter in 1899. has enlisted the co-operation of thousands of small 

hlnr'^rOOo't. Z ""'''!'''' ''''•'''' '^ '" ''"" '"'•■"^' ''' '''' ^^^•^"^^- >-^^-' '^^ -"^"'^"^-" - 1918 
Demg £16.000, £1,000 more than in 1917. 

eco„o,n?,!f ft- '""', l','™""''- '" ^°""""'^' 'l^'"' '«"i'i« 'o" appertaining the relative needs, efficiency and 
rZts lccor.l!".dv ™"°"' '"'"""'"■"""■■' "">■ ^P"'-' ei'-ou.nstances affecing tl,eir clain,s; and it allocates 

visitors^" Sw"'":!' T'r""" !r """" "" ""P^'^' ""•• ■"•»"'"' •■•»" ^^^ -™- '->• -^'-al and lav 
visitors. Ex racts from the V.sao.s' Reports, together with other ren.arks tearing on efficiencv or economy are 
communicated privately to the Hospitals with the grants, economj, are 

oarefnll'^" "T'"'",' '"''7'' "' ''""''"*' ''"'"''°" "'• '»'P'-<'™ment of Hospitals a™ submitted to the Fund and 
ca efully scrutiuised; and, in suitable oases, special grants am m,«le. An examination is now being made of aU 
schemes of importance deferred during the war, especially those which involve any increase in the numbe of L 

p co-opeiation with the Hospital Sunday and Hospital Saturday Funds, a Uniform System of Hos^l 
Accounts has been introduced which facilitates comparisons between the financial positions of the'various Hosp tl 

different 7"?V' T"'"' ' ""' """""'"" °' "" """''' «""'"'-' K<'Port showing the cost of working ^ 
diffeient Hospitals. The issue of these Reports has enable.1 the Hospitals to effect considerable savings. 

.<, Fi™ P '■;!''"™^"« *'°''' '""" "™ '° 'i™". -J -sports published, upon questions affecting Hospitals 
h ' I "^ T r' • f ^"'^ "' """""">• ^='"«rt-"">-ts ; Co-operative Contmcts ; the Out-patient Q„e!t o7' 
the Revised Uniform System of Hospital Accounts; Pensions for Hospital Office™ 

h... .^™'",""/°'-^Koing it will be seen that the Fund not only collects money for the volunUry Hospitals 
but also helps to secure that all contributions given to them are efficiently and economicatl^empS 

SPECIAL NEEDS-1919. 

Many London Hospitals Irnve done a great work for the Country during the war in the 
treatment of sick and wounded soldiers, hesidea their ordinary work for the civilian population. In 
addition to the great increase in the cost of commodities and labour they have now to face a large 
expenditure on renewaU and repairs which have necessarily been postponed during the War 

The amount distributed in 1918 was i:200.ooo, and it is most important that this 
level of distribution should be maintained. pu^t-m tnai mis 



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APR - 3 1344 



PENSIONS FOE HOSPITAL OFFICERS 

AND STAFFS. 

REPORT OF A SUB-COMMITTEE OE THE EXECUTIVE COMMITTEE 



OP 



KING EDWAKD'S HOSPITAL FUND 
FOR LONDON. 

(iNCOnPORATED BT AcT OF PARUAUKNT 1907.) 

Patron: HIS MAJESTY THK KINO. 



OoVKHNons: THE MARQUESS OF CAMBRIDGE. 

THE VISCOUNT IVEAGH. 

THE SPEAKER OF THE HOUSE OF COMMONS. 

TRF.AsrrnF.R: LORD REVELSTOKK. 

Hon. Secs. : IjORD SOMERr.EYTON, 

Mr. FREDERICK M. KIlV. and 
Mr. .TOJrN (;. (illlFFlTHS. 

Bankers: BANK OF ENcr.ANK. 

Officeh: 7 WAKBROOK. K.C.^. 

6rnrr.il CauiutI : 



KING EDWARD'S HOSPITAL FUND FOR LONDON. 



Thk lord LIEUTENANT OF THK 
COUNTY OF LONDON (Thk ^LVk 
QUK.SS OF CREWE). 

The BISHOP OF LONDON. 

The HLSHOP OF SOUTHWAKK. 

CARDINAL BOURNE. 

The Rev. A. E. (.ARVIE, D.D. 

The Kfv. \V. L. \VA I KI\>()N. |i.I>. 

The CHIEF RABBI. 

The earl OF BK.SSBOROUGH 
(CAait-uiaM, Ejctcutn>t Coniinitttf'). 

The viscount KNUTSFORD. 

The viscount MERSEY. 

The viscount SANDHURST. 

The viscount FARQUHAR. 

LORD REVELSTOKE 

(Chairman, Finance Coin mitt,;-). 

LORD BURNHAM. 

LORD STA.MFORDHAM. 

LORD .MURRAY OF ELI BANK. 

LORD SOMERLEYTON. 

LORD STUART OF VVORTI KY. 

The Hon. SIR ARTHUR STANl.KN . M I'. 

ThkHon. N.CHARLES ROTIlN( 111 I. D. 

The Hon. ALGERNON H. Mil I >. 

The POST.MASTER GENERAl.. 

The PRESIDENT OF THE LOCAL 
GOVERN.MKN I I!r»\RD. 

The PRESIDE.N 1 (»1 THE HOSII'lAL 
SUNDAY ANi> HOSPFIAL SATUR- 
DAY FUNDS (The Rr. Hon, THK 
LORD MAYOR.) 

March, imu. 



Thk chairman OF THE COUNTY 
lOUNClL. 

1 HK GOVERNOR OF I MK I; \NK OI 

ENGLAND. 
The PRKSIltKNT OF THE ROVAI. 

(OLLKiiE OF I'HVSICLVNS (DR. 

NORMAN MOORK. 

The president OF THK ROYAL 
COLLKGE OF SURGEONS (>IR 
GEORGE H. .MAKINS). 

ThbRt. Hon. THOM \> lUkl, M.I'. 

ThkRt. Hon. sir VK/KV .STRONG. 

SIR >VILLIAM S. CHURCH. Br. 

SIR \V .ALTER LAWRKNCK. IT. 

SIR FRANCIS H. CHAMPNEYS, Br. 

SuKfi.-t.EN. SIR ALFRED KF.OGH. 

SIR OWEN PHII.II'I>. M.I'. 

SIR HENRY BlRIiKn. 

SIR WILLIAM H. BENNETT. 

(Chairman, CfHfaiestent Homes 

Comiuitteei. 
SIR EVERARD HAMI;K(). 
SIR WILLIAM J. COI I I\>. MP. 
SIR HOR.VCE MARSHAI I,. 
SIR COOPER PERRY. 
SIR JOHN CRA(;GS. 
SIR JOHN TWEEDY. 

(Chairman. Itistril'ution Committee. 
Mr. FREDERICK M. FRY. 
•Mr. JOHN (;. GRIFFIIHS. 
Mk. YVO.N R. ECCLKS. 
.Mk. ROBERT FLEMING. 
.Mr. GE0R(;E LAWSON JOHNSTON 
Mk. W. J. H. WHITTALI„ 



REPORT SIGNED BY Mr. W. J. H. WHITTALL, Chainnam, and 

Mr. H. L. HOPKINSON. 

Part I. — The existing provision for Pensions at the London Vohmtary 
Hospitals. Recommendations as to Young Nurses. Objects to 
l)e aimed at in any General Scheme of Pensions, and recital of 
fundamental questions to be settled. 

Part II. — A survey of various methods of providing pensions, with a 
discussion of typical schemes already in operation in certain 
Government, Municipal, Railway, Educational, Hospital ami 
other Services. 

Part III. — Discussion of the fundamental questions involved in any general 
Scheme of Pensions for Hospital Officers and Staffs, as illustrated 
by the foregoing survey. General conclusions and discussion of 
the methods of giving effect to them. Rejection of Mutual 
Schemes and Final Recommendation of Insurance Method with 
separate provision for Disablement. 

DISSENTIENT MEMORANDUM signed by Sir WILLIAM J. COLUN& 



Summary of the Report, and of the Dissentient Memorandum. 

Appendices. 

Index. 



1919, 




Mention: 

C. & E. LAYTON, 56. FARRINGDON STREET, E.G. 4. 
GEO. BARBER, 23, FURNIVAL STREET, HOLBORN, E.G. 4. 



KS8 



MEMORANDUM. 



On April 6th, 1914, the following Members of the Executive 
CJommittee of King Edward's Hospital Fund for London were appointed 
a Sub-Committee to enquire into the question of Pensions for Hospital 

Officers : — 

Mr. W. J. H. Whittall, F.I.A., F.A.S., Chairman. 

Sir William J. Collins, K.C.V.O., M.D., F.R.C.S., M.P. 

Mr. Henry L. Hopkinson. 

with the following terms of reference :— 

" To enquire and report as to the existing provision for Pensions 
to Officers and Staff employed in the London Voluntary 
Hospitals, and as to what alteration or extension (if any) of 
the existing arrangements is desirable and practicable, and 
generally to make such recommendations as they may consider 
advisable." 



The following Report was presented to the Executive Committee of 
King Edward's Hospital Fund, who resolved :— 

(1) That this Report, with the Dissentient Memorandum and 
Appendices, be published for the consideration of the parties 
concerned. 

(2) That the Committee cannot recommend to the Governors and 
General Council that King Edward's Hospital Fund should in 
respect of its general funds give any guarantee in aid of any 

• Pension Scheme 

• •••»■ 1 1 '*••' 

•« • •• •* *• «••••• • 

• • • ••* •«• •• •• ••••• • 

• • •« ••• • •• ••»•• • 

October, 1918. ' .' ; ;; •; •;;. ;.// ; " 

• •;••-:••••• 



f^ 



"in" 



CONTENTS. 






INTRODUCTION 

REPORT SIGNED BY Mr. W. J. H. WHITTALL, Cfuiirnian, and Mr. H. L. HOPKINSON 

PART I.— The existing provision for Pensions at the London Voluntary Hospitals. 
Recommendation as to Young Nurses. Objects to be aimed at in any General 
Scheme of Pensions, and recital op fundamental questions to be settled ... 

Case submitted by Hospital Officers Association • 

The Extent and Limitations of the Existing Provision 

The General principle 

Analysis of Pensions paid in 1913 at Hospitals with Schemes and Hospitals 

without Schemes, respectively 

Loss of Pensionable Service through Migration 

The Element of Uncertainty, and Lack of Uniformity 

pjtfect on age of retirement ... .. ••• 

Derangement of Finances .. 

The Influence of the foregoing Limitations : statistics of total pensions paid 

in 1913 

Nursing Staffs ... ... ... ••• ••• ••• ••• ••• 

Special features affecting Nurses 

Small proportion of permanent employees 

Royal National Pension Fund for Nurses •- 

The Existing Provision for Nurses pensions at Hospitals with Schemes, 
at Hospitals aftUiated to the Royal National Fund, and at Hospitals 
without Schemes, respectively 

General Conclusion as to Nursing Staffs and Recommendation 

Summary of Conclusions as to Existing Provision 

The Alteration or Extension of the Existing System : Objects to be aimed at 

in any General Scheme 
Fundamental questions calling for preliminary solution 

PART II.— A Survey of various methods of providing Pensions, with a discussion of 

TYPICAL schemes ALREADY IN OPERATION IN CERTAIN GOVERNMENT, MUNICIPAL, 

Railway, Educational, Hospital and other Services 

Classification according to method of financial provision, viz. : 

Provision " in Advance " * and " in Arrear " f 

Importance of this classification ... 

Influence of minor differences between schemes ... 

Pensions provided wholly in Arrear f ... ... 

(a) On a Salary Percentage Scale { ... 

The Civil Service System ... ... 

The Existing Hospital Schemes ... ... 

(6) On a fixed Absolute Scale, or Flat Rate 

Old Age Pensions 

Pensions provided partly in Advance* and partly in Arrear f 

(f) On a Salary Percentage Scale J ... ... ... 

Police Otticers ... 
Poor Law Ofl&cers 
Asylums Ofl&cers 

The principle of continuous service 

Financial Provisions of these and other State Schemes 

Metropolitan Borough Schemes 

London County Council Superannuation System ... 

New Zealand Government Superannuation Funds... 

(d) On an Absolute Scale or Flat Rate 

(e) On the Money Purchase Principle § 



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• Provision '* in Advance," i.e., where the provision for the pension is made during the working life of the officer, 
t Provision " in Arrear," i.e., where the provision for the pension is not made until the payments fall- due. 
t Salary Percentage Scale, i.e., where the amount of the pension bears a defined ratio to the salary-. 
I Money Purchase principle, i.e., where the amount of each pension ife directly related to the amount of the oontribuka 
(kvailable to purchase it. 



IV 



(CONTENTS. 



Part II. — A Survey of various methods of providing Pensions — continued. 

Pensions provided wholly in Advance* 

(/) On a Salary Percentage Scale J — 

Bailway Superannuation Schemes in the United Kingdom 

Railway Clearing System Superannuation Fund 

Scheme submitted by Hospital Officers Association 

((/) On an Absolute Scale or Flat Rate 

Proposed General Scheme for Young Norses 
(^) On the Money Purchase Principle § 

Elementary School Teachers Deferred Annuity Fund 

Federated Superannuation System for Universities 

Secondary', etc., Teachers; System recommended by Departmental 
v^ominiutee. . . ... ..- ... ... ••• ••• ••• ••• 

Scheme recommended for Officers of Reformatory and Industrial Schools 

Royal National Pension Fund for Nurses 

New South Wales proposed Superannuation Fund 

Scheme submitted by Mr. T. Tinner, F.I. A. 

PART III.— Discussion op the fundamental questions involved in any General Scheme 
OF Pensions for Hospital Officers and Staffs, as illustrated by the foreooino 
survey. General Conclusions and Discussion of the Methods of giving effect 
TO them. Rejection of Mutual Schemes and Final Recommendation of 
Insurance Method, with Separate Provision for Disablement 

Fundamental questions of Principle 

Should the liability be provided for in Advance* or in Arrearf ? 

Should a scheme include death benefit ? ... 

Should the beneficiaries contribute ? ... ... 

Should a scheme provide for Existing Officers or be limited to future 
appointments?... 

Cost of Pensions in respect of Past Service 

Suramarj- of Conclusions as to General Principles 

Method of giving effect to these conclusions ... ... ... ... . ••• 

Discussion of alternatives — 

Mutual Fund for Salary Percentage Scale Pensions J 

Mutual Pension Fund on Money Purchase Principle § 

Elementary School Teachers Deferred Annuity Fund 

Royal National Pension Fund for Nurses ... 

New South Wales proposed Scheme and Mr. Tinner's Scheme 
General Problem of Disablement 

Mr. Tinner's Scheme resumed 

Federated Superannuation System for Universities 

(a) General Question of the Security offered by Insurance Companies 

{b) Adequacy of Pensions under the Universities System 

(c) Insufficient Benefit on Disablement in the Universities System... 

Genei-al Problem of Disablement resumed ... 

Suggested Central Body to supplement Disablement Pensions 

Separate Cost of Disablement PensiQns ... 

Cost of supplementing the Universities System 

Net Cost falling on proposed Central Body 

Other Considerations arising out of the Disablement Proposals 

Summary of Consideration of the Disablement Problem 

Conclusion as to Universities System 

Final Comparison of Mutual and Insurance Methods 

Rejection of Mutual Principle 

Final Conclusion and Recommendations 

Conclusion as to Disablement Pensions and Recommendation 



PAGE 

74 

74 
77 
81 
84 
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87 

94 

97 

102 

ia5 

9 



115 
115 
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123 
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135 
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179 



• Provision '• in Advance," i.e., where the provision for the pension is made during the working life of the officer. 
t Provision " in Arrear," i.e., where the provision for the pension is not made until the payments fall due. 
t Salary Percentage Scale, i.e., where the amount of the pension bears a defined ratio to the salary. 
§ Money Purchase principle, i.e., where the amount of each pension is directly related to the amount of the contribotiooa 
available to purchase it. 



C'ONTKNTS. 



DISSENTIENT MEMORANDUM SIGNED BY Sir WILLIAM COLLINS 



PAGE 
... 180 



SUMMARY OF THE REPORT AND OF THE DISSENTIENT MEMORANDUM ... 185 



APPENDICES :— 

I. " Case for a General Scheme of Pensions for Hospital Employees " submitted by the 

Incorporated Association of Hospital Officers ... ... ... ... 200 

II. Abstract of Pension Schemes in operation at various Hospitals ... ... ... ... 301 

III. System of Federation between Hospitals and the Royal National Pension Fund for 

X^ U 1 OvO ■•• ••• ••• •■• ••• ••• •«• ••• ••* ••• ••• •»• 4M\fv 

A. Typical Scheme of Federation ... ... ... ... ... ... ... 203 

B. Abstract of Existing Schemes of Federation ... ... ... ... ... 205 

IV.. Schedule of Pensions paid by the Loudon Voluntary Hospitals in 1913 206 

(i) To Officers other than Nurses ... ... ... ... 206 

« A. By Hospitals with Schemes .. . ... ... ... ... ... ... 206 

B. By Hospitals without Schemes - 206 

(ii) To Nursing Staffs 207 

A. By Hospital with Schemes 207 

B. By Hospitals affiliated to the Royal National Pension Fund for Nurses 208 
c. By Hospitals without Schemes 208 

V. Scheme of Pensions for Hospital Officers, prepared by the late Mr. H. W. Manly, F.I.A., 

and submitted by the Hospital Officers' Association ... ... ... 209 

VI. Extract from the Evidence of Mr. George King, F.I. A., submitted to Lord Southwark's 

Committee on Railway Superannuation Funds 212 

VII. Extracts from speech by Mr. Carson Roberts on Superannuation Funds of the 

Metropolitan Borough Councils ; with addendum on existing staffs 220 

VIII. Scheme of Pensions for Hospital Officers on the Money Purchase Principle by means 
of a Mutual Fund, by Mr. T. Tinner, F.I.A. ; with addendum treating of altei-native 

benefits for age 60 ; also of the cost of an existing staff and the cost of disablement ... 222 

IX. Memorandum on the use of Insurance Policies in Pension Schemes, by 

Mr. F. L. Collins, F.I.A. ; with addenda on the cost of disablement 234 

X. Type Cases of Salary Progression used for illustrative pui-poses in tlie text 245 

XI. Specimen Pensions under the Scheme for Superannuation of Officei-s of Reformatory 

and Industrial Schools 246 

XII. Extract from article on Annuities {Economic, October 14th, 1916) 248 

XIII. Memorandum on early retirements through disablement, and the cost thei-eof ; with 

notes on the proposed central body ... ... ... ... 250 



INDEX 



261 




f 

J 



KING EDWARD'S HOSPITAL FUND FOR LONDON. 



REPORT OF SUB-COMMITTEE appointed to consider the question 
of PENSIONS TO HOSPITAL OFFICERS. 



INTRODUCTION. 






1. On April Hth, 1914, the Executive Committee of King Edward's 
Hospital Fund for London, with the approval of the Marquess of 
Cambridge, Viscount Iveagh, and the Speaker of the House of Ctmmions. 
Grovemors of the Fund, appointed us a Sub-Committee to consider and 
report to the Committee upon the question of Pensions for Hospital 
Officers, with the following terms of reference : — 

'• To enquire and report as to the existing provision for pensions 
** to Officers and Staff employed in the London Voluntary 
*' Hospitals and as to what alteration or extension (if any) of 
" the existing arrangements is desimble and practicable, and 
*' generally to make such recommendations as they may consider 
•* advisable." 

2. Tlie enquiry arose out of a letter received from the Hospital 
Officers Association, in which the Association after pointing out the 
hardships suffered by Hospital officers, especially in the small Hospitals, 
from the uncertainty attaching to their prospect of an adequate pension, 
submitted a case for a general scheme of pensions, and asked whether the 
Fund would appoint a Committee to consider the question. 

3. Before appointing the Sub-Committee the Executive Committee 
addressed a circular letter to the London* Hospitals in order to ascertain 
whether the holding of the enquiry would meet with general approval 
The replies to this circular indicated that the enquiry would be very 
genemlly welcomed, and there was reason to believe that any practicable 
suggestion for getting over the difficulties in the way of securing pensions, 
particukrly in the case of the medium-sized Hospitals, would i-eceive'the 
sympathetic consideration of the Hospital Committees. 

4. During the course of our enquiry we have held several meetings 
and have had the benefit of interviews with repi-esentatives of the 
Hospital Officers Association, as well as with chairmen or members 
of Hospital Committees, both of large Hospitals with pension schemes 
and of smaller ones without schemes ; also with representatives from 



2 



INTRODUCTION. 



the Royal National Pension Fund for Nurses, and other witnesses with 
special knowledge of the nursing staflFs of Hospitals and of private 
nursing institutions. Several actuaries have also been good enough 
to attend as witnesses, including the late Mr. H. W. Manly, F.I.A., 
and Mr. George King, F.I. A.; while others, though unable to attend 
as witnesses, have sent us expressions of opinion on definite points. 
We may add that we had the advantage of hearing personally the views 
of Mr. P. J. Michelli, C.M.G., who has by his writings pressed on 
the attention of Hospital Committees and Staffs alike the need of a 
general pension scheme, and who came before us as one of the 
represent4itives of the Hospital Otticei-s Association. 

5. It should be mentioned that, while fully recognizing the 
advantages that might under certain circumstances follow from enlarging 
the scope of a pension scheme as widely as possible, we have 
confined our enquiry wholly to the Hospitals of London, in the sense at 
present adopted by the Distribution Committee of the Fund, namely the 
area comprised within the County of London or within nine miles of 
Charing Cross. It seems obvious, however, that, other things being 
equal, a system capable of extension to, or interchange with, other 
Hospitals would offer greater advantages. 



P^RT I, 



THE EXISTING PROVISION FOR PENSIONS AT THE 
LONDON VOLUNTARY HOSPITALS. RECOMMENDATION 
AS TO YOUNG NURSES. ORTECTS TO BE AIMED AT IN 
ANY GENERAL SCHEME OF PENSIONS, AND RECITAL 
OF FUNDAMENTAL QUESTIONS TO BE SETTLED. 



6. In accordance with 0!ir reference we first enquired into the 
existing provision for pensions to the officers and htafts other than nursing 
staffs employed in the London Hospitals, leaving the nursing staffs for 
separate consideration. 

We may begin by quoting the following extracts from a document 
submitted by the Hospital Officers Association,* entitled : 

" Case for a General Scheme of Pensions for 
Hospital Employees. 

" L Under the Uniform System of Accounts, Pensions are 
recognized as a legitimate part of hospital expenditure, and certain 
hospitals, e.(/., The London, St. Bartholomew's, Guy's, and the Cancer, 
have pension schemes of their own. In the majority of Hospitals, 
however, it rests with the Committee to decide whether pensions 
shall be given at all, and what their amount shall be. 

" 2. This condition of things creates great uncertainty in the 
minds of hospital officers as to their future. Committees may be 
favourably disposed to the granting of pensions at one time and 
unfavourably disposed at another. The old servant is dependent on 
a changing Board, and while one who has served long and faithfully 
may receive a just rewaixi, another, equally meritorious, whose case is 
considered when circumstances are less favourable, or who has 
outlived those who knew him in his best days, will obtain scant 
recognition of a life of hard work and devotion. 

" 3. Every officer who is promoted from one hospital to another, 
at present loses thereby, for pension purposes, the whole of his 
previous service. ... It is greatly to the advantage of hospitals that 
officials should pass freely from one to another, and anything that 
tends to check this movement, such as the fear of losing a pen.sion 
altogether, or the natural unwillingness to sacrifice a period of service, 
is detrimental to the hospitals as a whole. 

" 4. The want of a general pension scheme must l)e felt from 
time to time by the hospitals themselves as well as by the employees. 
Small hospitals particularly cannot afford to burden themselves with 
the heavy additional expenditure which the payment of pen.sions 



a2 



* See Appendix I. 



I 



I THE EXISTING PROVISION AT LONDON HOSPITALS. 

involves. So it might happen that a charity would suflFer by the 
retention of an old servant, whose work could be better and more 
profitably executed by a younger man, while the old employee would 
struggle on against failing health and strength, lest he should be . 
deprived of the wherewithal to maintain himself in his old age. 

- 5 If one of the head officials, such as the Secretary or Chief 
Dispenser, is granted an adequate pension upon his retirement, the 
salary of his successor must almost inevitably suffer as long as the 
pension continues." 

7 So far as the existing provision for pensions is concerned the 
statements contained in this memorandum, as amplified l>y the oral 
evidence of the representatives of the Hospital Officers Association, may 
be summarized under the following heads :— 

With ret^ard to the extent of the existing provision : 
(i) that the principle of pensions for Hospital officers is generally 

recognized, 
(ii) that at some Hospitals there are regular pension schemes in 

force, 
(iii) that where there are no regular schemes pensions are, as a rule, 

granted in case of need by the special act of the Managing 

Committee. 
With regarfl to the limitations of the existing provision : 
(iv) that .migration fi-om the service of one Hospital to that of 

another involves the loss of all claim to a pension resulting from 

the years of service at the first Hospital, 
(v) that at most Hospitals the prospect of an adequate pension is 

uncertain ; in no case is it assured, and in any event there is a 

lack of uniformity. 
(vi) that in all except the largest Hospitals the grant of pensions to 

superior officers deranges the finances. 
Our report upon the existing provision may conveniently take the 
form of a discussion of these points in the same order, and of the further 

question of 

(vii) the extent to which the foregoing causes have in fact operated. 
We will then proceed to a separate consideration of the question of the 
nursing staffs, which presents special features. The position of the 
weekly wage staffs must also be kept in mind. 

The Extent and Limitations of the Existing Provision. 

(i) The General Principle. 

8. With regard to the general principle of pensions for Hospital 
officers we are glad to report that so far as we can ascertain the prejudice 
against making provision, out of the funds of voluntary charity, for the 
old age of an officer who has rendered long and faithful service has 
largely if not wholly disappeared. The objection has, no doubt, been 
taken that money subscribed to a Hospital for the treatment of the sick 
poor should not be used for the granting of pensions, and we have in one 



the extent and lemitations of the existing provision. d 

or two cases come across the old-fashioned idea, based probably on the 
analogy of domestic service, that a [tension is to Ikj regarded as the 
rewai*d, granted as an act of grace, for the faithful service rendei*ed. 

9. We consider that the first of these objections is based on a 
confiLsion of ideas. The granting of a [)ension is not an act of charity, 
involving a diversion of the funds of a Hospital from the particular 
charitable purpose for which they were given. The granting of a pen.siou 
is the method of jmying to an officer a certain portion of the remuneration 
which he has earned and the payment of which is part <jf the onlinary 
expenses of carrying on the work. The principle that a ptMision is of the 
nature of deferred i)ay is becoming more and more clearly recognize<l l)oth 
in the various blanches of the public service and in intlustry, and it is recog- 
nized by the three great Hospital Funds of London in the regulations 
contained in the Revised Uniform System of Hospital Accounts, which 
require expenditure on pensions to be charged to Salaries and Wages. 
In particular it has been recognized in the case of Civil Service 
pensions, though, as we shall find, the expression *' deferred pay " itself 
is a loose and unscientific one which does not C4irry au exact meaning. 
It received further recognition from Parliament when it was decided that, 
for Income Tax purposes, pensions should be treated as " earned income."* 
Even where a pension is still looked upon as a gift by act of grace mther 
than as a deferrefl payment of salary which the employee has a right to 
claim, the association of the gift with long and faithful service amounts to 
a virtual recognition of the fact that the employee has fairly earned 
something over and above his annual salary. In no quarter has there been 
any suggestion that Hospitid officers already receive salaries on such a 
scale that the addition of a pension is not justifiable, i.e., that they 
can afford to provide for their old age out of their current remunemtion. 
On the contiary, we were told in evidence that Hospital officers in 
general are not sufficiently well paid to do this ; and it was upon this 
ground that a scheme submitted to us by the officers, to which detailed 
reference will be made later, was suggested upon anon -contributory liasis. 

10. If there has been any reluctance to recognize more fully the 
right of officers to superaniuiation it is no doubt due to the uncertainty 
that attaches in so many ciises to the financial prospects of the Hospital 
at the distant date when the pension will become payable. The newly 
appointed officer consents, in fact, to share the risks to which an 
institution dependent on voluntary support is liable. But we have no 
evidence that he would be asked, when the time comes, to undergo 
hanishipjf the Hospital were able to meet the expense, or if, by means 
of an oiganized scheme, it were able to make provision in advance for 
doing so. 

(ii) Hospitals with Schemes (6). 
(iii) Hospitals without Schemes (09). 

XL With regard to the pensions actually i>aid or piayable the 
existing provision must be considered under two heads : Hospitals with 
schemes and Hospitals without schemes. It will be convenient, as already'' 



HMI 



miii 



■ li'' mitt r-7 



e 



THE EXISTING PROVISION AT LONDON HOSPITAIA 



s\ 



said, to exclude for the moment the question of pensions to the nursing 
staffs. The latter is so important, and at the same time complicated by 
such different considerations, that it will be better to treat it separately. 

12. The Hospital pension schemes, where they exist, do not purport 
to be legal agreements binding on the Hospital. They ai-o only stotemente 
of the conditions on which the Hospital Committee intend to give pensions. 
Sometimes they are described merely as standing recommendations for 
the guidance of the House Committee in considering pensions. It seems 
doubtful whether they give the employee any legal claim, or if they do, 
against whom the claim could be pressed in the cases where the Hospitals 
are not legally constituted bodies : what they do is to give a reasonable 
assurance beforehand, first, that if circumstances permit a pension 
will be given, and second, that when given it will l^ear a specified relation 
to length of service, amount of salary, and so on. The existence of a 
scheme implies, moreover, that the Hospital Committee feel sufficient 
confidence in the future financial position of the institution to justify them 
in holding out hopes which, if fulfilled, involve a not inconsiderable 
liability. The degree of security which such schemes offer to the employee 
increases, naturally, with the extent to which the Hospital is endowed 
instead of being dependent for its annual upkeep upon the amount 
received from year to year from subscriptions, donations and legacies. 
The size of the Hospital is also an important factor facilitating the 
introduction of a scheme. An institution with a large staff can fairly 
calculate that the amount paid in pensions at any given period will not 
bear a conspicuously large proportion to the total salary account, and 
will not produce violent fluctuations in the annual expenditure or in the 
cost per bed. 

13. For these reasons the Hospitals with general pension schemes 
do not number more than six out of the one hundred and five from 
which particulars have been obtained. These are the London, 
St. Bartholomew's, Guy's, Middlesex, and St. Geoi-ge's, and the Cancer 
Hospital. They are all lai^e institutions ; some of them have very con- 
siderable endowments ; and the others, though more dependent on annual 
subscriptions and other current contributions, have large invested funds. 

14. In all cases the schemes are of the same type— that of the Civil 
Service pension scheme under the Superannuation Act of 1859, before 
the modification introduced in 1909. The pensions are non-contributory ; 
they are calculated at a certain fraction (usually one sixtieth) of the final 
salary for each year of service up to a maximum of two thirds (forty 
sixtieths) of the final salary. In one Ciise the fraction is one seventy-fifth 
but the scale begins with an initial benefit of fifteen seventy-fifths and 
rises to fifty seventy-fifths. The length of service necessiiry to qualify for 
a i>ension, the age of voluntary retirement and compulsory retirement 
respectively, the provision for a breakdown in health at an eariier age, and 
various other details, sometimes differ at different Hospitals, but the 
general principles are the same. Speaking generally the pension schemes 
cover all the pennanent officers and servants in the Hospital except the 



. HOSPITALS WITH PENSION SCHEMES. 7 

medical staff, though the detailed conditions for women are usually 
different from those for men. This type of pension scheme — the 
Superannuation Act of 1859 type — and its relation to the general 
question, will be discussed later. 

15. It follows from what has been said that at nearly 95 percent, of 
the Hospitals there are no pensions schemes, and the prospect of a pension 
depends on the attitude of the Hospital Committee and the financial 
position of the institution when the time comes. Amongst these we must 
include one or two Hospitals which, though they have no scheme 
formulated beforehand, do in practice pay pensions on the basis of 
the Superannuation Act of 1859. We have it in evidence fi-om the 
representatives of the Hospital Officers Association that, after enquiries 
among their members, there appears to be no instance on record of a 
pension being refused to a deserving person after long service. 

16. .We thought it would be in accordance with our reference to 
obtain information as exfict as possible regarding existing pensions, 
and the officials obligingly gave us the particulars for which we asked. 
One large Hospital included in the totals was unable to furnish all the 
particulars of their pensions payable, «and we were not able to include 
them in our analysis of the statistics. The total pensions payable in 1913* 
by Hospitals with schemes we found to be 42 in number, amounting to 
£3,268 14s. lOd. per annum, a sum representing on the average more 
than one sixtieth — nearly one fiftieth — of the final salaries for every year 
of service. 

The figures, classified according to cause of retirement, are given in 
the following Table : — 

Pensions paid in 1913 by Hospitals with Schemes. 
[Total Staffs other than Nursing Staffs.] 



Cause of 
Retirement. 


No. of 
Pensions. 


Total years 
of Sen-ice. 


Total final 
Salaries. 


Total Pensions. 


Averafio proportion of 
salary allotted for each 
year of serN-ice (about). -f 


Age 

lU-health ... 
Other causes 


33 

8 

1 


1,111 

218 
14 


£ s. d. 
4,380 16 8 

807 12 

104 


£ S. d. 
2.672 2 

572 9 8 

24 5 


One-55th 
One-38th 
One-59th 


All causes... 42 


1,343 


5,292 8 8 


3.268 14 10 


One-52nd 



17. In considering these figures, it is necessary at the outset to 
guard against one possible source of misunderstanding. These statistics 
throw no light at all on the questions, what minimum numlier of years 

* This enquiry having heen commenced before the war broke out, 1913 was the latest 
available year for detailed investigation. It did not seem necessary' or desirable to endeavour 
to bring these facts up to date. 

f This ratio, which we have adopted to facilitate comparison, represents, in any 
particular case, the proportion of one year's final salary which is granted by way of 
pension in respect of each completed year of service. \Vhere it is appendetl, as in the 
tables, to a group, it represents the average result of that group, and may, of course, mask 
considerable variations in individual cases. 



8 



THE EXISTING PROVISION AT IX)NDON HGSriTALS. 



HOSPITALS WITHOUT PENSION SCHEMES. 



d 



service was needed to eani pensions, how many employees had left the 
service of the Hospitals without them, and, generally, whether pensions 
have l>een gninted in every proper case. To ascertain all this would have 
required far more information than we could have asked for. The facts 
stated above refer only to such pensions as have in fact Injen granted and 
were in course of payment in 191o. 

18. Instead of attempting to draw conclusions from this taV)le, it 

will be more instructive to see the ptirticulars when the salaried staffs are 

sepjirated from the weekly wage staffs ; and this is done in the next 

tables : — 

Pensions paid in 1913 by Hospitaia with Schemes. 

[Salaried Stafts.] 



Cause of 
Retirement. 


No. of 
Pensions. 


Total years 
of Service. 


Total final 
Salaries. 


Total Pensions. 


Average proportion of 
salary allotted for each 
year of aervioe (about). 


Age 

Ill-health ... 
Other causes 


7 
2 


233 
43 


£ 8. d. £ 8. d. 
2,230 ' 1,440 

1 

350 296 9 


One-5l8t 
One-25th 


All causes . . 


9 


276 


2,580 1,736 9 


One-46th 







[Weel 


kly wage Staffs.* 




Age 


26 


878 


£ s. d. 
2,150 16 8 


£ 8. d. 
1,232 2 


One-59th 


Ill-health ... 


6 


175 


457 12 


276 8 


One-48th 


Other causes 


1 


14 


104 


24 5 


One-69th 


All causes . . . 


33 


1,067 


2,712 8 8 


1.532 5 10 


One-67th 



19. It is seen that of the salaried staffs seven officers were awarded 
pensions on account of age at an average rate representing nearly 
one fiftieth of the final salary for every year of service, the corresponding 
feature in the weekly wage class being the grant of 26 pensions at an 
average mte of rather better than one sixtieth of the final salary for each 
year of service. The retirements from ill-health have been even more 
genei-ously dealt with. Individual cases, of course, would differ a good 
deal from one another, and an aveiuge result may quite well mask some 
particular case of hardship. Taking the pensions, however, as a whole, 
one with another, we reach the conclusion that the schemes of this group 
of Hospitals have operated favourably to the beneficiaries as regards the 
amounts of the pensions in those cases where they actually have been 
granted. 

20. Coming to the Hospitals without schemes, we find they are 
paying in all 41 pensions, amounting to £3,570 16s. Od. per annum, 
which represents, as in the case of the Hospitals with schemes, an 
average of nearly one fiftieth of the final salaries for every year of service. 

-^ The female servants have been included in this class. 






The classified figures are as follows : — 

Pensions paid in 1913 by Hospitals without Schemes. 
[Totjil Staffs other than Nursing Staffs.] 



Cause of 
Retirement. 


No. of 
Pensions. 


Total years 
of Service. 


Total final 
Salaries. 


Total Pensions. 


Average proportion of 
salary allotted for each 
year of service (about). 


Age 

lUhealth ... 
Other causes 


16 
14 
12 


461 
366 
359i 


£ 8. d. 
2,355 6 

1,983 

2,241 14 


£ 8. d. 
1,153 16 

942 12 

1,474 8 


One-63rd 
One-55th 
One-46th 


All causes... 


41 


l,186i 


6,580 


3,570 16 


One-53rd 



21. As in the case of the Hospitals with schemes, we proceed at 
once to give the same particulars, separating the salaried staffs from the 
weekly wage class : — 

Pensions paid in 1913 by Hospitals without Scheaies. 

[Salaried Staffs.] 



Cause of 
Retirement. 


No. of 
Pensions. 


Total years 
of Service. 


Total final 
Salaries. 


Total Pensions. 


Average proportion of 
salary allotted for each 
year of serxice (about). 


Ago 

Ill-health ... 
Other causes 


7 
8 
5 


242 
204 
149^ 


£ 8. d. 
1,665 

1,470 

1,880 


£ 8. d. 
795 

685 

1,276 


Oue-72nd 
One-55th 
One-44th 


All causes... 


20 


595i 

• 


5,015 


2,756 


One-54th 



[Weekly wage Staffs.] 





8 


219 


£ 8. d. 
690 6 


£ 8. d. 
358 16 


One-53rd 


Ill-health ... 


6 


162 


513 


257 12 


One-54th 


Other causes 


7 


210 


361 14 


198 8 


One-55th 


All causes.. 4 


21 


591 


1,565 


814 16 


One-54th 



22. Bearing in mind that these results, as already stated, are merely 
a record of pensions which actually have been granted, it is to be noted 
that, whei*eas in the case of the Hospitals with schemes the retirements 
on account of age constituted a gi*eat majority of the whole, where 
there are no schemes they appear to constitute a minority. In the 
99 Hospitals without schemes there are only seven salaried officers 
retired from age, and they receive on the average less than one seventieth 
of the salary for each year of service, as against the proportion of nearly 
one fiftieth in the Hospitals with schemes. The number of similar 
pensions in the weekly wage class is small, being only 21 against 33 in the 
Hospitals with schemes, but the average proportion of the salary allotted 
is generous, being one fifty-fourth as against the smaller ratio of one 
fifty-seventh in the Hospitals with schemes. 



10 



THE EXISTING PROVISION AT LONDON HOSPITALS. 



23. The foregoing remarks are subject to an important qualification, 
viz., that the statistics take no account of the age at clat« of retirement. 
The comparative method we have adopted of calculating the amount of 
pension, taken as a proportion of the final salary, for each year of service 
naturally invites comparison with the "sixtieths" of the old Civil Service 
scale. It must be remembered, however, that in the Civil Service 
retirement may be claimed after age 60, whereas in the case of most 
Hospitals without schemes there are no fixed rules or principles. Unless 
we know the ages at retirement, and the treatment accorded to the 
advanced ages, it is not useful to pursue the comparison. 

24. A further difficulty arises from the fact that, as already pointed 
out, the retirements from causes other than age in this group form a 
much greater proportion of the whole than in the Hospitals with schemes. 
This fact, combined with the other foregoing considerations, suggests 
further enquiry into the details rather than trying to base conclusions 
on the figures as furnished by the Hospitals themselves. To this point 
we will return presently. 

(iv) Loss of Pensionable Service through Migration. 

25. On the question of the loss of pensionable service in the case of 
employees leaving the service of one Hospital and entering that of 
another, the Hospital Officers Association collected particulars from 
208 of their members, of whom 121 were London officers and 87 provincial 
officei-s. Of the London officers, 54 had served in more than one Hospital ; 
and, making further analysis of these 54, it was found that 445 years of 
their past time had been spent in previous appointments and 437 years in 
present appointments. On these figures the Officers Association remark 
that " 50 per cent, of the service of officers who have served in more than 
" one institution would not be counted towards a pension under existing 
" conditions." This statement by itself does not show the real position. 
By the time the officers in question attain a pensionable age, their 
" previous " service will be much less than 50 per cent, of their whole 
service. 



26. If thei-e has l^een deficiency of reward in respect of previous 
service not counted, such service may have been (a) outside Hospital work 
entirely, or (b) with other voluntary Hospitals. With the foi-mer we are 
not concerned, and it is only in connection with the latter that the 
officers submitted their figures. Before analysing them further, we may, 
however, point out that, just as some officers migrate from the outside 
into the Hospitals, so some of the officers included in these statistics 
will themselves migrate l>ack to outside work. Whether service thus 
terminated should l)e reckoned in any way for old age provision is a 
question which raises broad and controversial issues, and to which we 
shall have an opportunity of referring before we close our Report. 
According to the principles of pensioning as ordinarily accepted, all 
service of that kind, in the absence of a scheme specifically recognizing it, 



LOSS OF PENSIONABLE SERVICE THROUGH MIGRATION. 



II 



is excluded from view. The average service to date of the officers above 
referred to is, in the London Hospitals, over 14 years. For our present 
purpose, therefore, these officers may be regarded as a fairly settled body, 
among whom the numl)er of men who will sacrifice pension claims by 
removiil to the outside is probably not large. 

27. For the sake of clearness we have re-armnged the facts submitted 
to us in the following form : — 
Statistics of Previous Service in Voluntary HospiTAiii furnished 

BY 208 Officers. 







London 
{121 Officers). 


Pbovikces 
(87 Officers). 




No. of 
Years. 


Average 
per Officer. 


No. of 
Years. 


Average 
per Officer. 


Present service ... 
Previous service 


• • • « • ■ 

• • • • a • 

Total 


1,296 
445 


10-7 
3-7 


958 
200 


110 

2-3 




1,741 


144 


1,158 


13-3 



28. From this table it is seen, taking the 121 London officei-s there 
was an average service of 14*4 years, of which, on the average of the whole 
body, 37 years, or about one-fourth of the whole, was spent in previous 
service in other Hospitals. By the time the survivors of this body attain 
the avei-age pensionable service of 33 or 35 years prevailing in their class 
(see pars. 18 and 21), what proportion of the whole will their previous 
service represent ? 

29. As time goes on, the years of previous service will be diminished, 
as we have said, by those who migrate to the outside, but will l)e inci*eased 
by those who continue to migrate from one HospiUil to another. It would 
seem hopeless to make any estimate for 20 years ahead of the jiction 
of these divergent forces, and of the action of prolwble deaths meanwhile. 
On the whole, something like the existing average of 37 (say 3 J) yeai-s 
previous service is not unlikely to be maintained to the end. That would 
represent about 10 per cent, of the [>ensionable service on which existing 
pensions have proved to be Imsed, and may perha[)s be taken to represent 
very roughly the extent to which the lK)dy as a whole is penalized if 
previous service be excluded. 

30. If the tables of existing pensions given in pai-agraphs 18 and 21 
were to l>e adjusted by iissuming that the average duration of service was 
in each group increased by 10 per cent, and the proportion of salary 
allotted for each year correspondingly decreased by 10 per cent., the 
general conclusions, such as they are, to be drawn from the tables would 
not be greatly affected. 

31. We have supplemented these general considerations by a scrutiny 
of the individual cases comprised in the tables. In the case of the Hospitals 



LOSS OF PENSIONABLE SERVICE THROUGH MIGRATION. 



13 



12 



THE EXISTING PROVISION AT LOND«JN HOSPlTALi*. 



with schemes previous service is naturally excluded professedly by the mles, 
but in the pensions arising out of the salaried cla.ss in this group we find 
only one case, with a possible second, where the officer has apparently 
suffered any marked <letriment. In the weekly wage group the rule ha.s 
possibly been detrimental in many inst^mces. In 17 cases the age at 
entry wa^ over 30 ; but it is unknown to what extent there was pi-evious 
service in other Hospitals. 

32. Taking the Hospitals without schemes, there are two (with a 
possible other two) retii-ed secretaries who wouhl seem to have suffered 
from the principle in question. In the weekly wage class there is no 
obvious ca^e, but, as in the former group, there are many entrants over 30 
whose previous history is unknown. The total numl)er of j^ensioners 
however, is so extremely small in this group of Hospit^ils compared with 
the mass of employees as to raise questions beside which that of previous 
service is comparatively insignificant. 

33 If the outcome of such experience as we have been enabled to 
gather on this question is to suggest that the loss of pensionable service 
through migration, measured as a proportion of the whole body of service, 
may easily be exaggerated, yet it is equally clear that such loss presses 
with hardship in individual cases. We can hai-dly say it constitutes a 
general grievance, because, theoretically, every man, before accepting a 
new appointment, can raise the question. In practice, however, this is 
not easy, and the difficulty undoubtedly acts as a discouragement to 
migration. We certainly consider it an advantage that migration from one 
Hospital to another should not be discouraged. Cases must and often do 
occur where an officer has reached the top of some special department 
and wishes to gain a more general experience of Hospital administration, 
or has risen fairly high in the geneml management and desires a post of 
greater responsibility than he can hope to attain within a reasonable time 
at his own Hospital. To such a man a vacancy in, say, the secretaryship 
of some smaller Hospital may offer the chance for which he has been 
looking. Later on, moreover, the wider experience gained at the smaller 
Hospital may make him a better all-round candidate for the highest post 
at his old Hospital than he would have been had he been content to stay 
in one groove on the chance of succession by seniority. Ambition, enter- 
prise, and readiness to take responsibility are rewarded, he finishes by 
being a better man and the service at both Hospitals has benefited by 
inci-eased efficiency. 

34. We find that these arguments though admitted to a large extent, 
at any rate in the abstract, by the representatives of the large Hospitals, 
appeal more particularly to the smaller institutions. The small Hospitals 
look to the lai-ge Hospitals as a source from which to obtain skilled 
officers, and the large Hospitals do not directly discourage them from 
doing so. But undoubtedly the loss of pensionable service acts as a 
deterrent The officer in such a case often has to sacrifice security in 
accepting responsibility, while the smaller Hospital, if it were to offer 



full pension rights to a man who has been any length of time at 
a larger Hospital, would be incurring a greater liability in the way 
of pension than if it promoted a younger though perhaps less 
efficient man from its own limited staff. It does not seem easy to find a 
remedy for this in the absence of any general pension scheme. Some of 
the larger Hospitals apparently still look upon a pension as a i-ecognition 
of long and faithful service to the individual institution, and though they 
are sometimes willing in special cases to give a gratuity to an officer who 
leaves them, the ordinary tendency is clearly to look upon the migration as 
a voluntary forfeiture of all claim in this respect. The general view, we 
gathered, was the insular one that their pension schemes were never 
intended to relieve from pension liabilities the funds of other Hospitals to 
which their employees might have migrated. 

35. At fii*st sight it may be thought that this limited recognition 
of pension rights derives support from government practice. We .shall 
find later (see par. 139) the principle laid down by Loixi Courtney's 
Commission that state pension rights cannot l>e dissociated entirely from 
continuity of state service. But when attention is paid to the manifold 
varieties of state pensionable service, including all conditions of life in 
almost every ptirt of the world, it is, we think, more instructive to regard 
it mther as a vast aggregation of varied services in which ambition can, 
and by arrangement between departments does, find scope for development 
without loss of pension rights. The Boaitl of Education, as will be seen 
in the course of our report, are enforcing the principle that no loss of 
pension rights shall ensue on migmtiou m analogous sections of the 
teaching service. 

36. One of the larger Hospitals made a suggestion that it might 
be willing to count, as qualification under its own pension scheme, 
previous service at any other Hospitals that might care to join and 
form a reciprocating group for this particular purpose. This would 
remove the hardship in the case of officers migrating from a smaller 
Hospital to a larger, but it does little to meet the problem which faces 
both the man who is going to a smaller and poorer Hospital, and the 
Hospital which is taking him. In fact, any such suggestion presupposes 
the existence of homogeneous schemes at all the Hospitals in the 
proposed group. We may add that it would not be correct to assume 
the equity, as between large and small Hospitals, of an arrangement of 
this kind without some further investigation of the law of migration 
between such Hospitals, and other matters. Nor, of course, would it he 
a step forward in the way of providing beforehand financially for the 
pension liabilities of the future. That, however, is as far as we got in 
the way of eliciting any desire for, or suggestion of, a comprehensive 
scheme from the representatives of the great Hospitals. 

37. Summarizing this part of the question we have come to the 
conclusion 

(a) that the absence of a comprehensive pension scheme does act as 
a penalty on migration, and therefore discourages migration, 



14 



THE EXISTING PROVISION AT LONDON HOSriTAIii. 



UNCERTAINTY ANP LACK OF- UNIFORMITY. 



la 



(b) that the piinciple of migration in analogous service is, on the 
whole, beneficial alike to the institutions and to the officers 
concerned, and should be encouraged instead of discouraged, and 

(c) that the small Hospitals ex|ienence the resultant difficulties 
much more than the large. 

(v) The Element of Uncertainty, and Lack of Uniformity. 

38. We think that the complaint of uncertainty applies not so much 
to the fear of no pension at all as to the uncertainty of the age at which 
it may be possible to apply for one, and also to the fear that, when 
granted, it may after all be inadequate to the needs of the retired officer. 
We could not go so far as to say that there is no fear of the refusal of 
a pension altogether. We had evidence that at a Hospital which is in 
the habit of giving pensions, an officer in a subordinate position, though 
really past work, was afraid to hint at retirement for fear lest his hopes 
of a pension should prove unfounded. Even at important Hospitals with 
schemes we hear of individual employees expressing a preference for an 
alternative form of scheme, by which, even at the cost of making a 
contribution out of their existing salaries, they should substitute certainty 
for what seems to them to be uncertainty. 

39. We saw that, taking the old Civil Service scale as a standard, the 
pensions now in existence are, on the whole and on the average, not 
ungenerous. But viewing the resulting pensions in the aggregate, and not 
relatively to a fixed scale, there is room to enquire whether the absence 
of a free option to retire, such as exists in the Civil Service, has not in fact 
operated to postpone retirements against the wish of the employees, and, 
if so, whether and to what extent it has affected adversely the officers and 
the Hospitals. The Hospital officers have assured us that the existing 
state of uncei-tainty did so operate ; and it is therefore important to 
see whether the facts before us can throw any light on this question. 
Any circumstances exercising an undoubted pressure in that direction 
would, pnma facie, be a serious obstacle to efficiency. 

40. Taking first the retirements returned by the Hospitals as due 
to age, we find the average age of each group at date of retirement to be as 
shown in the following table : — 

Average Age at Ketirement of Existing Pensioners. 
(Retirements from Age only.) 





Salaried Staffs. 


Weekly wage Stafh. 


• 


No. of Pensions. 


Average age at 

Retirement 
(where given). 


No. of Pensions. 


Average age at 

Retirement 
(where given). 


Hospitals with Schemes ... 
Hospitals without Schemes 


7(fl) 
7(6) 


64 

72 


26 

8 


66 
67 



(o) Detailed ages:— 60, 70, ?, ?, 66. 60, 65. 
(6) „ „ 80, 66, 75, 67, 65, 70, 79. 



41. Owing to the paucity of the numbers, we have had to forsake 
further statistical analysis and submit the details to scrutiny, in the manner 
ah'eady suggested as necessary in paragraph 24. Taking firet the salaried 
officers, there are seven retirements from age in the Hospitals with 
schemes. Of these seven officers, two held special appointments and 
were well treated. The other five were minor officials whose cases do 
not present any obvious matter for criticism, except that (as already 
mentioned) one had previous service which did not count, with the i*esult 
thjit he received about one-68th for each year of service, instead of one-COth 
as he might have had otherwise. In this group the average age of i-etire- 
mcnt is 64, and there is no obvious case of pi*essure to defer retirement. 

42. The cases of the seven officers in the corresponding group of the 
99 Hospitals without schemes are less satisfactory. Two are chaplains 
who retired at 79 and 80, and although in one case the pension is p<K)r, 
the sum in question is very small. Of the remaining five officers, one is a 
dispenser who worked till 75, and was then well treated. Another is a 
secretary, who was given a salary proportion of one-6()th at 65 after 24 years* 
service. The other three were also secretaries, but of Hospitals with small 
resources, and were inadequately pensioned. One worked for 25 years, 
till 66, when he retired from "ill-health and age," and received one-82nd. 
Another, who also worked 25 years till 67, but who held another 
appointment, received a single payment, of which the annual equivalent 
would be about one- 100th for each year. The third worked till 70, and 
was then retired at the ratio of only one-93rd for his 37 years of service 
and lived only one month to receive the pension. 

43. These facts led us to look into the 26 retirements returned bv the 
Hospitals without schemes as due to ill-health and other causes {see Table 
in par. 20) ; and we found that no less than 18 of them (of which 7 are in 
the salaried group and 1 1 among weekly wage earners) took place at age 
60 or over. These, being regai*ded for the present purpose as more 
properly coming within the category of age retirements, have also been 
submitted to scrutiny. 

44. Of the seven cases in the salaried group, four are secretaries ; 
three of these, so far as the facts show, were well treated. One of them 
worked till 67. In the fourth case the officer broke down in health at 60 
and was given a small pension, representing only one- 160th of his salary for 
each year. The remaining three cases were those of minor officials, of whom 
two worked till 65 and were well treated. The third worked till 63, and 
was evidently in bad health when the interests of the Hospital suggeste<l 
his retirement, and the pension given was not generous. 

45. So far we have given special attention only to the salaried 
officers. Coming to the weekly wage class, there are in Hospitals with 
schemes 26 retirements on account of age, and each pension shows, as 
we should expect in this group, a i*easonable proportion of pension in 
respect of each year of service. Previous service in other Hospitals is 



^m k.\>m.- "-^ - * „^^ 



16 



THE EXISTING PROVISION AT LONDON HOSPITAIJS. 



DERANGEMENT OF FINANCES. 



17 



professedly ignored. The average age at retirement was 66, and in 
seven cases was over 70. 

46. In the Hospitals without schemes, there are only eight retirements 
attributed to age, and in all cases the age is well over 60, the average 
being 66J. In two cases (in two of the larger Hospitals) the amounts 
are poor, but in the others seem not open to remark. The general 
impression is that the men had to go on working as long as they could. 
As regards the 1 1 retirements over age 60 returned by the Hospitals 
under other headings (see par. 43) four were women servants who received 
small allowances when they could work no more. Of the seven men, 
six were retired at ages ranging from 63 to 69, being apparently incapable 
of further service, the allowances in two cases being small (viz., only 
one- 160th for each year of service in one case, and one-96th in the other). 

47. Our geneml conclusion on this part of the investigation is that, as 
regards Hospitals without schemes, while the Officers Association appeared 
to attach more importance to the lack of uniformity, the uncertainty as to 
the age at which a pension may be «applied for is probably the more 
serious feature of the two. It is true that we have found a lack of uniformity 
and even certain cases of real haixiship, due, no doubt, to financial 
considemtions ; and it is not surprising if only one or two such instances, 
affecting men well known in their profession, should introduce, as we are 
informed they have done, a feeling of insecurity generally. But the fact 
remains that the great majority of administrative officers have found their 
claims fairly recognized, when it has come to the point, as regards 
amount ; whereas the tendency to defer the age of retirement is found, 
not occurring in a few exceptional cases, but running fairly steadily 
throughout the experience. 

48. It is difficult to resist the contention of the Officers Association 
that this fact, indicative of the general condition of uncertainty, is 
not only calculated to diminish efficiency in the case of existing officers, 
but may even tend to discourage promising men from entering the service 
at all. It is thus in a double sense a misfortune for the Hospitals 
themselves as well as the officers. 



(vi) Derangement of Finances. 

49. We do not think that these elements of inadequacy or 
uncertainty, so far as they have been found to exist, are due to any 
failure to appreciate the services of the officers in question. They are 
due partly to the fortuitous kind of control inseparable from the existence 
of numerous committees of management with little sense of community or 
continuity, and partly to the financial uncei-tainties necessarily attaching 
to institutions dependent on charitable support received from year to year ; 
and also to the fact that, except in large Hospitals, the grant of 
any considerable pension involves liabilities which may prove to be 






out of all proportion to the total aimual income and expenditure, and 
I>articularly to the yearly salaries bill. At a small Hospital, for insUmce, 
the retirement of a secretary on an adequate pension may cause a sudden 
and very appreciable increase in the total outgoings and in the apparent 
cost of working, and may even cause a deficit. It might, of course, be 
argued, on the ground that the pension is deferred pay, that it was 
the previous salary chai*gc which was too small and not the new 
combined charge which is too great. 13ut this argument does not 
solve the immediate financial difficulty ; and there is, no doubt, a 
strong tendency, the existence of which is largely confirmeil by our 
enquiry, either to defer the retirement of a man really too old for full 
efficiency, or partially to equalise the salaries account by reducing the 
remuneration offered to the incoming officer. Either of these courses is 
injurious to the best interests of the Hospital, and it is evident that what 
is really needed, in the absence of large eftidowments, is some method of 
making the expense of the pensions a continuing charge, fi'ee from violent 
fluctuations. The difficulty of doing this in a single small institution, 
where the liability cannot be averaged over a large staff, is one of the 
strongest arguments in favour of some scheme that would, among other 
things, provide for that need. 



(vii) The Influence of the foregoing Limitations. 

50. We now come to the important, but very difficult, question, to 
what extent have the foregoing causes in fact operated in limitation of 
pensions? As already stated (see par. 17) we could not ask for sufficiently 
exhaustive information to answer this question accurately. 

5 1 . Summarizing the published statistical information that is available 
in regard to this part of the subject, we find that in the year 1913 six large 
Hospitals with schemes, providing about 27J per cent, of the occupied 
beds, and having a salary list of £84,845, paid in actual pensions the 
sum of £5,362. This represented 632 per cent, of the total salaries. 
On the other hand, 99 smaller Hospitals without schemes, having a salary 
list of £177,642, provided about 72^ per cent, of the occupied l^eds, but 
paid in pensions the absolutely smaller sum of £4,257, which represented 
only 2*4 per cent, of their total salaries and wages. Putting it another 
way, and adding together the total salaries and tlie total pensions of all 
the Hospitals combined, we find that the Hospitals with schemes psiy 
32J i>er cent, of the total salaries and 55J per cent, of the total pensions : 
whereas the Hospitals without schemes, although they provide 67| per 
cent, of the salaries, or more than two-thirds of the whole, yet of the 
pensions pay only 44j per cent., or considerably less than one-half 
of the whole. 

52. Though it is not possible to draw exact conclusions from such 
meagre data, the Imre facts are so striking that we set them out in tabular 
form : — 



18 



THE EXISTING PROVISION AT LONDON HOSPITALS. 



Statistics of Pensions paid in 1913, by 105 Hospitals 
[Total Stiitts otlier than the Nursing Staffs.] 





No. of 
Hospitals. 

6 
S9 


No. of 

Occupied 

Bods. 




Number. 




Amount. 






Ofiicers. 


Peusionere. 


% 


1 
Sularios. 


Pensions. 


% 


Hospitals Avith 
schemes 

Hospitals without 
schemes 


2,685 

7.076 


1,564 
3.257 


60 
57 


3-85 
1-75 


£ 

84,846 

177,642 


6.362 
4,267 


6-32 
2-40 


All London 
Hospitals. 


105 


9,761 


4,821 


117 


2-43 


262,487 


9,619 


3-66 



N B. The large Hospital mentionea m paragrupn xu « .».v<.««^ — - 

totals are available although the details required for the previous tables were not. 

53. Thus the pensions actually payable in the case of all the London 
Hospitals represent 366 per cent, of the total salaries. If the pensions 
themselves be excluded from the latter the ratio is rather more. It will 
\ye useful to compare this with the ratio in fully pensioned services. It 
was stated by Sir William Byrne of the Home Office (see par. 160) in 
giving evidence l3efore the Select Committee on the Asylum Officers 
Superannuation Bill, that the supeiannuation scheme in force in the Civil 
Service involved a charge " equivalent, according to actuarial calculations, 
to between 12^ and 16 or even more per cent, of the amount of the actual 
salaries." Later on in his evidence he increased this estimate to 16 or 
18 per cent. It is difficult to determine whether he was here speaking of 
the actuarial cost of providing for the pensions in advance ; or of the 
mere latio of the non-effective pensions to the effective salaries voted by 
Pariiament at the time of actual payment. The late Mr. Manly, an 
actuary to whom we shall have occasion to refer presently, gave it to us 
in evidence that in his experience the current charge for Civil Service 
tenns worked out at about 15 per cent, of the salaries, and this would 
agree with the latter interpretation of Sir William Byrne's statement ; 
as would also Sip. Fiancis Mowatt's evidence before Lord Courtney's 
Commission, to which we shall refer later (see par. 143). 

54. Heading the whole passage, however, and its reference to the 
claim made when police are lent for various purposes, it would seem that 
Sir William Byrne was in his own view speaking of original or present cost, 
and this view might agree with other estimates. Mr. P. L. Newman. F.I.A., 
estimating the cost of Civil Service pensions synthetically from standard 
mortality tables,* put the present cost (i.e., the amount that should 
be deducted from the salaries in advance) at V2 per cent, in the case of 
second division clerks, and at 18^ per cent, of the salaries for the more 
rapidly promoted officials in the first <livision. The corresponding 
current charges at time of payment he put 2iH per cent, and 38 per cent, 
respectively. Other estimates of the latter mode of reckoning the charge 
that we shall mention in the course of our Report (nee par. 180 and 

♦ See Cd. 1745, p. 210. 



EfFKCT OF THE FOREGOING LIMITATIONS. 



19 



Appendix XIII, par. 5) are 21 J per cent, in the case of the Metropolitan 
Borough Funds, and 22 or 28 per cent, under the conditions of the 
Itailway salaried services. The latter calculations are based on the actual 
experience of these services in the way of salary progression and 
resignations, etc. 

65. It should be explained that such estimates as these are 
liased on the assumption that the body of officers concerned remains 
constant in numbers, and that the fund, actual or supposed, has attained 
equilibrium. In practice this does not happen. Mr. G. King, F.I. A ,* found 
that in the Civil Service the pensions actually paid were 21 J per cent, of the 
salaries, and in a large Bank 20J per cent. ; but in both cases the service 
was growing rapidly, and, the bodies not having attained equilibrium, 
those pereentages must, in his opinion, increase in the future. This is 
confirmed by Sir Thomas Heath's evidence before Lord Courtney *s 
Commission,! where it is stated that in the case of a i-apidly growing 
depaitment like the Post Office, with many low-paid employees, the 
non-effective vote was as low as 4*8 per cent, in 1892-3 and had only risen 
to 6 per cent, in 1902-3. In the more stable Treasury department, with 
higher paid men, it was 29 per cent, in 1902 3, and in the Customs as 
much as 30*6 per cent. 

56. The total staffs of the whole of the Hospitals have proliably 
fonned a steadily increasing body for many years past. Wlien many of 
the present pensioners entered service the aggregate salary list must have 
been much smaller than it is at present, and for this reason we should 
have expected pensions l)iised on the Civil Service scale to have 
shown a lower percentage than the prevailing estimates mentioned in 
paragraphs 54 and 55, but not one so extremely small as 3 66 per cent. And 
bearing in mind (i) that the Hospitals with schemes are the oldest and 
best established, and have therefore probably not experienced such a large 
growth in the sahiry list as the younger and more heterogeneous body, 
(ii) that the pensions which have Ixicn granted work out on the avei-age 
better than the Civil Service scale, and (iii) that the proportion of 
lower [)aid employees cannot be so high as in the Post Office, we should 
not have expected in their case such a low proportion of jwnsions as 
6 32 per cent. 



57. As regards the more numerous Hospitals without schemes 
the disparity seems to l>e greater still. Although many of these 
have developed within compiratively recent yeai^s from being much 
sm.aller institutions, and others have not been long in existence, this 
cause seems inadequate to account for so gi'e.'it a difference in the 
pension proix)rtion as 24 ijcr cent, conqmred with the 22 or 23 per 
cent, to l)e exjiected in a fairly established community, even where the 
staffs fluctuate as much iis they do in the Kailway service. Nor is the 
explanation found in any obvious insufficiency of the pensions actually 



* See Cd. 5484. Q. 4576. 



t See Cd. 1745. p. 7. 



b2 



20 



THE EXISTING PROVISION AT LONDON HOSHTAtS. 



gntnted, .hich have been seen to be, speaking genemlly, °» * g«"^ 
scale in this gi-oup as in the other. As we have, however already 
; J 1, ttere'is a subtle form of ins„mcicncy >vhic. does not 
Appear in the tables, viz., the tendency to defer the age of -~t. 
and we are driven to the conclusion that in this cause, and lu the 
geneml " leakage" of service due to migrations and the casual nature of 
much of the service in such a hctei-ogeneous Ixnly of inst.tu ions, is to be 
foimd the explanation of the low percentage of pensions m this group. 

NuKsiNO Staffs. 

Special Features affecting Pensions for Nurses. 

68 The problem of pensions for the nursing spiffs of Hospitals 
presents certain special featui^s. Oue of these is that a very krge 
Lportion of the nulling staff at any given time usually cons.ste of 
JZlers or of partially tiuined or newly qualified "^ ^^^ »P;f^ 
only the early years of their professional career in the sei^ ce o the 
particular Hospital, and who very ft-e<iuently p.«s sooner or late out of 
Hospital service altogether and into private nursing, /""thei is the 
exisLce of a special fund, the Royal National Pension F""^/"^ Nu«es 
established for the express purpose of pioviding by ""^"^ "^ ~ 
insurance for the pension needs of nurses, whether engaged on Hospital 

work or not. 

59 We should perhaps explain that the tem " pi-obationer ' is 
used in different senses at different Hospit^Us. It sometimes covers the 
whole period of tmining which must elapse l,efoi-e a nurse is eV^ible for 
an appointment .vs a " staff nurse." and sometimes only part o th«s Penod 
The tmining usually lasts either three or four years. But it may be 
divded into sections: a short preliminary stage before tje probatumer 
signs the contract for the thi.e or four yeai.; a second «tage dun^g 
which she is wholly in statu pnpiUan and is giving he Hospital 
compamtively little in the way of valuable service in return for her 
3.g. her pay and her keep; and finally a third stage dunng which 
r is « pable^f moi. or less responsible work and becomes gradually of 
more anymore positive value to the Hospital, even befo,. *« /J^i 
wholly from the >tat>. ,>upillari» and either joins the fully qualified staff 
or leaves the Hospital for some other branch of the profes.sion. The 
tmnsition from the second stage to the third is naturally gra.lual ; the 
dSng line is hanl to dmw and will differ with diffe,.nt individuals^ 
Some witnesses place the beginning of «,sponsible work at the opening of 
the second year ; others towanls its close. 

Small Proportion of Permanent Employees. 

60 From the fact tliat a large pi-oportion of the nursing staffs 
usuallv consists of protationcrs or young nui^es, who only stay in the 
service of the Hospital three or four years, it follows tbit the number who 



SPKCIAL FEATURES AFFECTING NURSING STAFFS. 



21 



are at any time approaching superannuation is much smaller in comparison 
with the total employed than is the case with other Hospital officers. 
Nor is this all. Not many years ago it was a fairly general rule for the 
fully qualified portion of the nursing staff — staff nurses, sisters and even 
matrons — to be composed of nurses who had entered as probationers and 
had remained in the service of the same Hospital ever since. So long 
as this custom prevailed, the qualified nurses, as distinct from the 
probationers, whatever their comparative numbers, constituted a more or 
less permanent staff with continuous records of service with the Hospital. 

61. But in recent years it has become more and more the practice at 
many Hospitals, even for those of the probationers who would formerly 
have obtained posts on the staff, to leave the Hospital (temporarily at all 
events) on, or within a year or two after, the completion of their training. 
There are now many more outside openings available, and by taking 
advantage of these they gain a wider experience, greater variety, and 
often higher remuneration. The same tendency to change often continues, 
moreover, throughout their career, even with those who return later on 
to Hospital nursing. The result of this is that, at the Hospital, the 
qualified staff itself, at all events below the rank of matron and sister, now 
consists largely of nurses who have been only a comparatively short time 
in the service of the particular institution, and who may not remain in its 
service long.* 

62. The effect of these changes on the question of pensions for 
Hospital nurses is obvious. When such of the nurses as came on to the 
qualified staff stayed in the service of the Hospital from their entry as 
probationers till their ultimate retirement from work, they acquired, as 
they severally approached the age of superannuation, moral claims upon 
the consideration of the Hospital which collectively constituted a pension 
problem similar to that of other Hospit^il officers. But now that the 
qualified nursing staff consists largely of short period employees the 
prol>lem of pensions for Hospitiil nurses attaining or approaching super- 
annuation is quite altered. In so far, in fact, as the pension problem is 
looked upon as one of long and faithful service to the individual Hospital 
it hardly exists apart from the matrons and some of the sisters ; for, 
except at a few Hospitals where the tendency to frequent change has 
been to some extent counteracted l)y the existence of a pension scheme, 
it is more and more the case that the majority of the nurses who 
approach the age of superannuation do so without any long period of 
continuous service in the Hospital behind them. 



* At some Hospitals there is connected with the Hospital a Trained Nurses Institnte 
which supplies nurses for private patients. Probationers who on completing their training 
enter such an institute take up private nursing without severing the connection with the 
Hospital. In some cases such nurses alternate private nursing with service in the wards, 
and even where this is not done service with the Institute may count, for pension purposes, 
as service with the Hospital, or at least as no breach of continuous serviib. Such cases are 
to this extent exceptions to the general statement made above and to the deductions drawn 
from it in later paragraphs. The Private Nursing Institute sometimes has a pension scheme 
of ito own. In one case (Westminster) the Institute is wholly responsible for pensions, the 
nursing staff of the Hospital l)eing provided, under contract, by the Institute, which is their 
actual employer. 



22 



THE EXISTING PROVISION AT LONDON HOSPITAli*. 



63 There is thus much to be said for the view expressed to us by 
ceitain of the Hospital chairmen that, taking any particular Hospital, 
the pension problem for the qualified nursing staff tends to become a. 
problem for the individual nui-se, or for the nursing profession, rather 
than, directly, a problem facing the Hospital Committee. This has always 
been so in the case of the probationer who leaves HospiUil service for 
good at the end of her period of training. At many Hospit^ds it has 
become almost equally so in recent years for the qualified staff who remain 
in Hospital service or return to it in after years. 



The Royal National Pension Fund for Nurses. 

64 The Royal National Pension Fund for Nurses, which we have 
mentioned a^ a special feature bearing on the problem of the nurses, 
was established in the year 1887 and was designed to meet the 
double problem of pensions for nurses as it existed in those days : the 
problem of the individual nurse who left Uy go into private nursing or 
some outside branch, and had to make provision for her own old age ; and 
the problem of the Hospital which would ultimately have to face the 
claim of those who stayed on permanently in its service. 

65. Accordingly, the primary work of the Royal National Pension 
Fund for Nurses was to organise a scheme of annuities for nui-ses, 
provided for by means of premiums on a basis of mutual insurance. To 
this original scheme, which dealt with the nurse as an individual and as a 
member of the nursing profession, was added a system of Hospital 
affiliation, which dealt with her as a Hospital employee. By this method 
of affiliation the Hospitals were invited to pay a proportion of the 
premium for the pension policies of their nurses, thus at once assistmg 
them as individuals to secure greater benefits than they could afford to do 
unaided, and at the same time making in advance some provision towards 
the Hospital's own moral liability for those who might stay on in their 
service until the pension age. 

66. The object of the Royal National Pension Fund for Nurses, 
as originally stated, is " to afford to nurses an absolutely safe means of 
providing, at the lowest possible cost to themselves, an allowance dunng 
incapacity for work caused by sickness or accident, and a certain income 
for their declining years. This object will be carried out by receiving 
and investing such fixed periodical sums as those who join the Fund 
can afford, by adding to the pensions all the profits arising from any 
soui-ce, and by supplementing those sums from a Donation Bonus Fund, 
created and ' maintained by those interested in nurses and nursing 
institutions." * 

67. We understand that the sickness provision has not been largely 
resorted to; but some 10,000 pension policies h^ve been effected. 



ROYAL NATIONAL PENSION FUND FOR NURSES. 



23 



Pensions of various amounts are paid for by monthly premiums; for 
example, a pension of £30 per annum to commence at 55 would cost IGs. 4d. 
monthly starting at age 25, or £1 Is. :5d. starting at 30. For a similar 
pension commencing at 50 the corresponding payments would be £1 3s. lid. 
and £1 12s. 5d. monthly. It will be seen that the amounts are large for 
a young nurse unaided. In the event of death or withdrawal before the 
pension age, the contributions are all returned, except perhaps in the first 
two years, and in many cases with 2^ per cent, intei'est. Lower i-ates of 
premium are quoted on a *' non-returnable liasis," but the Fund does not 
encourage this system. 

68. In the "affiliation" part of its scheme the essential details of each 
separate contract are exactly similar to those of its general contracts, Imt 
the Fund renders very useful service l)y supplying the Hospitals with 
" model " rules which may be adapted to the domestic requirements of 
each institution, by setting forth the monthly premiums pjiyable by the 
Hospital and the nurse for each respective quota of the ultimate pension 
as determined by the Committee, and by facilitating the maintenance of 
the policies in later life as the nurses drift into private practice. In these 
cases it is frequently a provision of the rules that the whole benefit of the 
policies shall enure to the nurse provided she maintains them for the 
first year or two after leaving the Hospital, the Fund taking care that if 
they are not so maintained the share of the past payments contributed by 
the Hospital shall be reserved for its account and not paid over to the 
nurse. 



69. A good deal of propaganda work is done with the object of 
inducing nurses to join the Royal National Fund, and this is encouraged 
by such of the Hospitals as assist by means of an affiliation scheme. In 
other cases the matron will perhaps bring the benefits of the Fund to the 
notice of the younger nurses, or will arrange facilities for the secretary of 
the Fund to do so himself. These efforts in the way of propaganda, 
though evidence on the subject was not easy to get, scarcely seem to 
have met with the sympathy from the management that one would 
expect ; and have not, in fact, had very extended results. 

70. All members of the Fu\id are entitled to have their annuities 
increased from the profits and otherwise as above stated ; and in the 
past substantial additions have been declared from these sources. 
We shall later on have an opportunity of referring to the actuarial 
and other merits of the Royal National Pension Fund. The usmil 
evidence is available upon which a judgment can be formed as to 
the value of its benefits having regard to the special circumstances and 
needs of nui-ses. The scheme of the Royal National Fund can also be 
compared with the benefits obtainable through oniinary insurance 
companies, both those which have drawn up special schemes for nurses 
and those which have not. For the moment our interest in the Fund is 
limited to the extent to which it enters into the question of the existing 
provision for nurses' pensions at the London Voluntary Hospitals. 



24 



THK EXISTING PROVISION AT LONDON HOSPITALS. 



71. Even so the relation of the Royal National Pension Fund to the 
subject of our enquiry is to some extent indirect. The fund is open to 
" any attendant upon the sick and suftering," and this definition includes 
not only Hospital nurses but also the employees of nursing institutions 
and private nurses working on their own account.* It is not possible 
to say what proportion of the 10,()00 members of this Pension Fund, or of 
the 1,868 who are (1913) already drawing pensions, are or were employed 
at London Hospitals or indeed at Hospitals at all ; since the distinction is 
not important from the point of view of the Pension Fund. Nor have we 
thought it necessary to ascei-tain what proportion of the nurses engaged 
in the London Hospitals are insured in this Pension Fund, for our enquiry 
hardly extends to the private arrangements which Hospital employees 
may make for themselves. Thus our chief concern with the Koyal 
National Fund, as will presently appear, is through its system of affiliation, 
for which the statistics are available. 



The existing Provision for Nurses' Pensions. 

72. The extent to which the pension needs of the Hospital nursing 
staffs, taking into account the special featui-es ali-eady descril)ed, are at 
present met by the Hospitals may be described under three heads: 
(1) Hospitals with schemes of their own; (2) Hospitals affiliated to 
the Royal National Pension Fund for Nurses ; and (3) Hospitals with 
no scheme at all. 

73. There are eight Hospitals which have schemes of their own 
•for the provision of pensions for the nursing st^iffs, viz., London, 
Guy's, St. Bartholomew's, Middlesex, St. George's, Poplar, Cancer, 
and Cheyne. 



74 At most of these the pension schemes 
same lines as those for male officers — namely, on 
of the Civil Service (1859) with a maximum of two 
emoluments. In some cases, however, the details, 
commencing proportion, the annual increments, 
service, and the age of retirement, are moi-e 
for men, since otherwise a pension adequate to 
be secured. 



for nurses are on the 
a basis resembling that 
-thirds of the salary and 

in such matters as the 
the minimum length of 

favourable than those 
maintenance would not 



75. At the Middlesex, there is the additional provision that, in 
special cases, pensions up to full pay may be gmnted after 20 years 
service. At the London Hospital, there is no sliding scale on Civil 
Service lines, but any nurse on attaining the age of 45 aft-er 18 years 



=^= The definition also includes all paid officials connected with Hospitals and kindred 
institutions. Officials other than nurses sliare in the profit bonuses, though not in the benefits 
of the Donation Bonus Fund. As a matter of fact the number of male officers joining the 
Fund has been infinitesimal, and no table of benefits for such officers is published. 



t 

I 



EXISTING PROVISION FOK NURSES PENSIONS. 



25 



service can retire on full pay. This was adopted in 1899 in place of a 
scheme of affiliation with the Royal National Pension Fund for Niu-ses. 
The same system is in force at the Poplar Hospital. At both the London 
and the Middlesex Hospitals there are special pension funds created, 
partially at lejist, out of the profits of the private nursing and available 
for the payment of pensions to Hospital nurses. 

76. At Guy*s a scheme on the usual Civil Service lines is combined 
with affiliation to the lioyal National Pension Fund for Nurses, it being 
one of the conditions of the scheme that both the beneficiary and the 
Hospital shall take out policies with the Koyal National Fund. The 
annuity (£11 5s. Od.) in respect of the Hospittil policy is received by the 
Hospital and is included in the pension payable by the Hospital under 
the scheme, but the pensioner's own annuity (£7 10s. Od.) is, of course, 
received by her in addition. Failure to join the Koyal National Fund 
when required by the rules of the Hospital to do so involves the 
forfeiture of all claim to a pension. Service in the Trained Nurses 
Institute continuous with service in the Hospital counts for pension 
purposes as service with the Hospital, and in this case also the profits of 
the Institute are set aside for the nurses, some part l>eing spent on 
supplementary pensions. 

I 

77. There are seven London Hospitals which are affiliated with 
the Koyal National Pension Fund for Nurses but have no other pension 
scheme for any members of their staffs. These are the Dreadnought, 
the Hospital for Consumption (Bronipton), King's College Hospital, 
Paddington Gieen, Queen Charlotte's, the Royal ¥ree, and St. Mary's. 
Including Guy's, with its combined scheme of affiliation and direct 
pensions, the total number at present affiliated is therefore eight. 

78. The conditions of the annuities provided under these seven 
affiliation schemes differ in details, but the typical arrangement is that the 
Hospitiil pays the premiimi for a policy securing an annuity of £11 5s.' Od. 
per annum at age 50 or 55 on behalf of any nurse who takes out on her 
own account a policy for not less than the same amount. The oft'er is 
usually confined to mations, sisters and staff or certificated nui-ses, though 
in at least one Ciuse half the premiums ptiid by a prelmtioner on a policy of 
£22 10s. Od. will l)e reimbursed to her by the Hospital on her joining the 
staff; while in another case '* nurse " for the purposes of the scheme means 
any person in the employ of the Hospital eligible to join the National 
Fund, and this, as we have seen, is in theory a very wide definition. There 
is usually a condition that the nurse must have been in the continuous 
service of the Hospital for a certain period : and a provision for the 
assignment of the Hospital policy to the nurse in the event of her 
leaving after a certain length of service, usually a short period, but before 
the pension age. There is often a provision that in the event of the 
nurse forfeiting her right to the Hospital policy (e.g., through not keeping 
up her own) the premiums paid by the Hospital are returnable to a trust 



26 



THE EXISTING PROVISION AT LONDON HOSPITALS. 



STATISTICS OF NURSES PENSIONS. 



27 



fund held for the Hospital by the Royal National Fund for the benefit of 
the nurses of the Hospital. 

79. It does not necessarily follow that the Hospital will in no case 
make a further grant by way of pension to a meral)er of the nursing staff 
thus insured. The affiliation scheme, when accepted by a nurse, gives 
her a legal claim to a certain amount of pension, and, by making provision 
for this in advance, assures the Hospital against at least part of her 
moral claim in the future. 

80. At the other Hospitals, namely, 85 out of a total of 100, 
there are no schemes at all for the nurses. At several of these there will 
l)e, of course, nurses who have insured themselves with the Royal National 
Fund, or some other agency, sometimes with the encouragement, though 
without the assistance, of the Hospital. At others, cases of super- 
annuation ai-e considered on their merits, and pensions are from time to 
time actually given, as in the case of other officers. 



Statistics of Nurses* Pensions. 

81. The following tables give the figures for the details of nurses' 
pensions corresponding to those already given in paragraphs 16 and 20 for 
the other staffs : — 



Pensions Paid in 1913 t»» Nuksing Staffs. 



L Hospitals with Schemes. (7.) 



Cause of 
Retirement. 


No. of 
Pensions. 


Total years 
of Service. 


Total final Salaries. 


Total 
Pensions. 


Average proportion 


Cash. 


Estimated 

value of 

emoluments. 


without 
emoluments. 


with 
emoluments. 


Age 

Ill-health ... 
Other causes 


29 
3 


642 

42 


£ 
1,636 

288 


£ 

1,340 
150 


£ 8. d. 
1.413 12 4 

124 2 


One-25th 
One-32Dd 


One-46th 
One-49th 


All causes ... 


32 


684 


1,923 


1,490 


1,537 14 4 


One-26th 


One-47th 



II. Hospitals affiliated to RN.P.F.N. (7.) 



Age 


9 


224 


£ 
439 


£ 
390 


£ 8. d. 
343 


One-32nd 


One 60th 


Hi-health ... 


4 


87 


405 


180 


137 


One-64th 


One-93rd 


Other causes . 


5 


98 


315 


220 


212 


One-29th 


One-49th 


All causes... 


18 


409 


1,159 


790 


692 


One-39th 


ODe-64th 



III. Hospitals without Schemes. (85.) 



Cause of 


No. of 
Pensions. 


Total years 
of Service. 


Total final Salaries. 

Estimated 
Cash. value of 

emoluments. 


Total 
Pensions. 


Average proportion 


Retirement. 


without i with 
emolumeuts. emoluments 








£ 


£ 


£ s. d. 






Age 


6 


156 


381 


300 


252 10 


One-39th 


One-70th 


Ill-health ... 


9 


169 


835 


450 


432 


One-36th 


One-56th 


Other causes 


1 


20 


50 


50 


30 


One-33rd 


One-67th 


All causes . . . 

• 


16 


345 


1.266 


800 


714 10 


Oue-38th 


One-62nd 



82. The following are the figures of average age at retii-ement : — 



Average Age at Retirement of Existing Pensioners. 



Hospitals with Schemes 

Hospitals affiliated to E.N.P.F.N. 
Hospitals without Schemes 



Retirement from Age. 



No. of Pensions. 



29 
9* 
6 



Average Age 
at Hetirement. 



53 
59 
67 



Retirement from Ill-health. 



No. of Pensions 



3 
3 
9 



Average Age 
at Retirement. 



48 
55 
52 



* In one of these cases particulars axe not available. 



Details of Age Distribution. 





42-44 


45-49 


50-54 . 


55-59 


60-64 


65-CT 


Superannuation 


With Schemes ... 
Affiliated' 


4 

•d 


6 


5 
1 


8 

4 


6 
2 


• 

1 


-• 


Without Schemes... 


— 


— 


2 


1 


3 


— 




With Schemes ... 


I 


— 


2 


— 


— 




Ill-health 


Affiliated 


— 


— 


1 


1 


1 




• 


Without Schemes... 


— 


2 


4 


1 


2 





83. The following table corresponds to the table in paragraph 52 
illustrating the extent to which the causes tending to produce inadequate 
provision for pensions had in fact operated : — 



I 



28 



the existing provision at london hospitals. 

Statistics of Pensions paid in 1913 by 99 Hospitals. 

[Nursing Staffs.] 





No. of 

Hospitals. 

ib) 


No. of 

Occupied 

Beds. 


Number. 


Amount. 




Nurses. 


Pensioners. 


% 


Salaries 

with 

estimated 

value of 

emoluments 


Pensioni. 


% 


I. Hospitals with 
schemes 


7 


2,430 


1,262 


56 


4-43 


81,690 


£ 

3,113 


3-81 


11. Hospitals 
affiliatecl to 
R.N .P.F.N. 


7 


1,195 


491 


18 

• 


3-67 


32,865 


692 


211 


III. Hospitals with- 
out schemes 


85 


5,246 


2,223 


22 


•99 


146,434 


941 


•64 


Totals 


99 


8,871 


3,976 


96 


2-41 


260,989 


4,746 


1-82 



Notes to the foregoing Tables, 
(i) The statistics exclude in all cases the following : — 

(a) Pensions paid by the Royal National Pension Fund to which Hospitals have 
contributed under affiliation schemes. 

(b) Hospitals where the nursing staff is maintained or their pensions are paid out 
of funds separate from the funds of the Hospital. 

The following are included in paragraph 83, which gives the totals, but not in 
paragraphs 81 and 82, which are based on details. 

(c) Hospitals where the total figures are available, but not the necessary details. 

(d) A few cases of pensions where either the method of remuneration or some other 
peculiarity rendered the details unsuitable for averaging. 

(ii) The figures of Hospitals affiliated to the R.N. P.F.N, do not include Guy's, which is 
placed under Hospitals with schemes. 

(iii) The Hospitals aifiliatetl to the R.N.P.F.N. also paid £219 in 1913 in premiums in 
respect of policies taken out on behalf of Nurses. 

84. For various rea.sons we feel even more hesitation in drawing 
conclusions from these figures than we <lid from the tables relating to the 
pensions of the staffs other than the nursing stafis. 

85. In the first place, as is explained in the notes, they do not 
cover the whole of the provision for nurses' pensions, since in some cases 
this is provided by the Royal National Pension Fund, while in others the 
responsibility for the future of the nurse is shared, or even wholly borne, 
by some agency not forming part of the Hospital. If pensions paid under 
the latter circumstjinces are included, the proportion of pensions to 
salaries at these Hospitals will often \ye greater than under normal 
conditions ; if the outside pensions are excluded the proportion will lie 
smaller. Where, therefore, the resulting disproportion seemed to be 
sufficiently substantial the Hospital has been omitted altogether from the 
statistics. In the second place, where there are schemes, the terms on 
which the pensions are provided sometimes differ so greatly, not only in 
detail but also in principle, that figures arrived at by averaging the results 



STATISTICS OP nurses* PENSIONS. 



29 



will not bear much weight. In the third place, it follows fi-om what has 
been said in paragraph 60 et seq. that many of the iiuises receiving 
pensions in 1913, whether from the Hospital or from one of the other 
agencies, earned those pensions under conditions that have ^iiissed away ; 
so that even if it was possible to make allowance in the statistical tables 
for the disturbing factors mentioned al>ove, the result would not throw 
much light on the pensions problem of the present. Lastly, the numl)ers 
involved are so small as to rob a detailed analysis of any gi-eat value. 
Subject, however, to these reservations the following comments may be 
made. 

8t$. At the Hospitals with schemes it will Ixj noticed that in ca.ses 
of superannuation the average rate of pension in proportion to salary and 
years of service given in paragraph 81 comes out rather higher for the 
nursing staff than for other officers, while at the Hospitals without 
schemes the average is somewhat lower ; Hospitals affiliated to the 
Royal National Pension Fund coming somewhere between the two. 

87. If we compare the nurses' pensions at Hospitals with schemes 
with the nurses' pensions at other Hospitals we find that the scale of 
su|ierannuation pensions at the former is much higher than at either the 
affiliated Hospitals or those without schemes. If the figures thus average*! 
are analysed we find that this result is due not to a universally higher 
scale at the Hospitals with schemes, but to differences in the extreme 
instances. In each case the largest number of pensions ai-e on the scale 
of about one-fiftieth. But at the Hospitals with schemes there are several 
pensions of l^etween one-thirtieth and one-fiftieth, the majority of these 
l>eing given under the London Hospital scheme base<l on full salary, 
while the lowest pensions do not fall below one-seventieth except for 
three that work out at between one-eightieth and one-ninetieth. At the 
affiliated Hospitals there are no superannuation pensions above one-forty- 
eighth, while there are three between one-sixtieth and one-one hundred 
and second. At the Hospitals without schemes they all fall between one- 
forty-ninth and one-eightieth, except one which is as low as one-one 
hundred and seventy-second. Such a figure as this illustrates once more 
the element of uncertainty on which the Hospital Officers Association lay 
so much stress. 

88. The table of ages and age distribution in pai-agraph 82, like 
the similar table for the other staff's, gives evidence of the way in 
which this uncertainty shows itself in postponed retirements. At the 
Hospitals with schemes, where uncertainty is not present, the average 
age of superannuation is lower and in more than one-thiixl of the ca.ses 
analysed took place at under 50. On the other liand, at affiliated 
Hospitals and Hospitals without schemes the whole of the retirements 
returned as being due to age occurred at between 50 and 57. Moi-eover 
3 out of the 12 retirements attributed to ill-health took place at over 60, 
one of these Ijeing at an affiliated Hospital. There has thus l>een 
apparently the same tendency, on the part of nurses a^ of other officers. 



do 



THE EXISTING PROVISION AT LONDON HOSPITALS. 



to postpone the age of retirement until actual ill-health renders further 
service impossible ; and this, as we have seen, may be tAken as evidence 
of hardship resulting from the inadequate provision of pensions. 

89. When we turn to the statistics of total pensions as compared 
with total salaries given in paragraph 83, we find that, low as was the 
percentage of the total pensions in the case of other officers (s'ee 
par. 52), it is much lower still in the case of nurses. At the 
Hospitals without schemes the pensions are almost negligible. At 
Hospitals with schemes the amount paid in pensions bears a lower 
ratio to total salaries and emoluments than with other officers. On the 
other hand, at these Hospitals the number of nurse pensioners bears a 
higher proportion to the total staff than does the number of other 
pensioners. No doubt these results are the combined effect of several of 
the causes already mentioned. The tendency of nurses to migrate to other 
work will of course reduce the percentage both of pensionere and of 
pensions ; while this tendency is doubtless checked to some extent at 
the Hospitals with schemes. Tlie combination of a higher percentage of 
pensioners with a lower percentage of pensions may be due to the fact 
that while emoluments constitute on the avemge a much gi-eater share 
of the remuneration of nurses, this element is not always given its full 
weight in calculating pensions. At some Hospitals in fact it is explicitly 
ruled out. 



4 



90. It will be noticed that at the Hospitals which are affiliated to 
the Royal National Pension Fund, but have no pension schemes of their 
own, the percentages both of total pensioners and of total pensions 
resemble the higher scale at the Hospitals with schemes rather than the 
lower scale at Hospitals without schemes. A scrutiny shows that, although 
all but one retired after the introduction of the schemes of affiliation, they 
all belonged, both by age and by length of service, to an earlier period. 
Evidently the HospiUils which have cared enough about the future of 
their nurses to enter into affiliation with the Royal National Pension 
Fund have also paid, to the older generation of nurses, pensions on a 
scale approximating to those paid at the Hospitals with schemes of 
their own. The affiliation schemes have not yet matured sufficiently to 
show whether the option to join them will have in pmctice the effect of 
wholly relieving these Hospitals of a similar sense of res[)onsibility in 
respect of those of the younger nurses who will stay with them. 

91. Some of the affiliate<l Hospitals have supplied figures showing 
the way in which the popularity of the Royal National Pension Fund 
with the nurses in their employment has fluctuated, owing to the various 
causes already mentioned. Thus at one Hospital with about 1 20 nurses 
the scheme was started in 1892 with 25 members, rising in the following 
year to 48. In ten years the numl)er had fallen to 4. It then rose again 
to 16, then fell to 3 and finally to none at all. With the advent a few 
years ago of a new matron interested in the scheme it began to rise again, 
and very soon most of the sisters had joined. At another Hospital the 



i( 1 ' 



J 



INSUFFICIENCY OF EXISTING PROVISION FOR NURSES. 



ol 



scheme never attracted more than 3 or 4, and in 1913 there was only 
one left. 



92. This evidence is borne out by the small total amount of 
premiums paid by the seven affiliated Hospitals, which avei-aged in 1913 
only 9s. 5d. per member of the staff. As half the minimum premium 
quoted in the tables of the R.N.P.F.N. for a pension of the usual type 
(viz., the returnable premium for an annuity of £22 IDs. Od., commencing 
at age 55 and taken out at age 21) is £3 Os. 6d., it is evident that a 
very small proportion of the nui*ses were members in 1913. We should 
add, however, that at one of the seven Hospitals the total premiums psiid 
avei-aged £3 2s. 2d. per member of the staff, while none of the others 
exceeded lis. Id. per member — a contrast which affords one more 
illustration of the varying popularity of the scheme. 

93. In the case of the London Hospital there is some conflict of 
evidence on the question whether the nurses prefer the old affiliation 
scheme, which ensured them a certain pension provided they kept up the 
payment of their share of the premium, or the present scheme whereby 
they can retire on ''full pay" provided they stay in the service of the 
Hospital during the whole of the prescribed period. This is one of the 
cases (aee par. 89) in which emoluments are disregarded. Where, as iu 
the case of most nurses, these constitute the major portion of the 
remuneration, any practice which disregaixis them gets away fi-om the 
facts. The stated results cannot be compared with those of ordinary 
pension .systems. At the same time, it is clear that fmm the point of 
view of the Hospital the existing scheme conttiins the possibility of a 
heavy liability in the future. 

94. Before arriving at any general conclusions as to the nursing staffs, 
we took evidence from three matrons of Hospitals and also a former 
matron who has at present considerable acquaintance with the cireum- 
stances of the nurses who leave the Hospitals for private practice. 
As regards the more permanent elements of the nursing staffs, the 
evidence confirmed the insufficiency of the existing provision. Even where 
schemes exist in the larger Hospitals there is a prevalent apprehension that 
all may be lost by a premature breakdown of health, while among the 
smaller Hospitals the constant changes of service, undertaken probtibly 
more thoughtlessly of consequences than in the case of the administrative 
staffs, would seem to reduce to a very small compass the number who 
could submit claims for pensions with a long record of service.* 

95. As to prolmtioners, the evidence was unanimous that they are put 
on responsil)le work either at the l>eginning of their second year, or, in any 
case, before the end of it, and for this reason have a certain claim for hiirher 
renumeration than is usual. There was also a consensus of opinion that 



* Mr. Manly, F.I.A. who investigated 560 cases {see Appendix V), found only 9 who 
had served for 20 years and over. The average service was only 4J years. 



32 



THE EXISTING PROVISION AT LONIK)N HOSPITALS. 



CONCLUSIONS AS TO NURSING STAFFS 



33 



nurses are, as a class, heedless of the future, even when they get good 
earnings later on in private practice, and that they should be taught and, 
if possible, induced to save. 

96. One of the witnesses, representing an impoi-tant Hospital, was not 
hopeful of a good result from forcing the proljationers to effect aftiliation 
policies. The other three wei-e strongly of opinion not only that all 
probationers should be assisted to effect pension policies, and that their 
work in their second year would justify the extra cost to the Hospitals, 
but that such action would be an important factor in starting the habit of 
thrift and that the great majority of such policies would be maintained in 
afterlife. As to the duty of Hospitals towards their nurses in this matter 
one of these ladies summed up her views on the point so clearly that we 
quote them as far as possible in her own wonls : — 

" I think it is a thing Hospital Committees ought to be asked to 
" do ; not that they might do but that they ought to do. I am 
" speaking from the point of view of matron as well as nurse, 
" for the probationers are only young women and for that reason 
" want looking after ; and I think Hospitals should pay something 
*' extra." 

97. The witness who knew most of the nurses' circumstances in 
after life was emphatic that those who had been induced to effect 
initial policies at their Hospitals were more provident as a class 
subsequently ; all the witnesses agreed that the proliationer's share of the 
contribution need not be a financial difficulty if her friends understood in 
advance that it was an obligatory feature of the training. 



General Conclusion as to Nursing Staffs. 

98. We are led to the general conclusion that the existing provision 
for pensioning the nursing staffs is very insufticient and unsatisfactory, but 
that a distinction must be drawn l)etween the case of those matrons, 
sisters and some staff nurses the nature and duration of whose service is 
comparable to that of Hospital officers, and the case of tho.se nurses and 
probationers the nature and duration of whose service is so different 
from that of other Hospital officers as to call for different treatment in 
the matter of pensions. 

Permanent Nursing Staffs. 

99. In regard to the first class, we are of opinion that the 
principles applicable to pensions in the case of Hospital officers should 
operate in this case also. The question of emoluments (itee pars. 89 
and 93) does not seem to have received sufficient attention in the past. 
We are of opinion that they should be reckoned at their proper value for 
all pension purposes. 



Younger Nurses in Training. 

« 

100. In regard to the second class, where there is a marked want 
of any provision for old age, it would seem that the responsibility, in its 
strictest sense, of facing the pension problem rests rather on the individual 
nurse or on those who may be able to organize the nursing profession 
than on any one else. It is possible that the nursing profession 
may be organized in time, and the organization of the future may 
conceivably, following the precedents of the great Trade Unions, include 
sickness and even superannuation within the purview of its benefits. 
It is not conceivable, however, that any development of the future could 
entirely supplant the need for individual thrift. 

101. Now in our view it is the Hospital, and only the Hospital that, 
by encouraging and assisting the young nurse while she is under its 
tutelage, can thus initiate some provision for old age, and hence render 
her so great a benefit, material and moral, that the desirability— we 
might perhaps put it so high as the duty— of doing this should be 
seriously considered by every Hospital Committee. We are of opinion 
that if and when the nurse passes from the status pupillaris to that 
of responsible work, at the end of the first year or whenever it may be, 
the governing body should encourage provision for old age. We proceed 
to consider the best method of giving effect to this conclusion. 

102. The method whereby the Hospital which employs the nurse 
can co-operate in making this provision, as has been done by those 
Hospitals where the affiliation scheme of the Royal National Pension 
Fund for Nurses is in operation, marks a great advance upon the laissez- 
faire system and has shown a laudable desire on the part of these 
Hospitals to face their responsibilities in this matter as far as could 
reasonably be expected. 

103. In the first place, the Hospital thereby provides something in 
advance for the claims that may arise in the future under any general 
scheme in respect of nurses who stay on in its service, or return to it 
later on as sisters or matrons. In the second place, it recognizes the 
fact that the Hospital has to a very large extent the guidance and control 
of the future nurse at the outset of her training, i.e., just at the age 
when she can take out a policy on the most favourable terms and is yet, 
from inexperience and lack of personal income, least likely to do so. 
The Hospital, by encouraging and assisting her to make this provision, 
has therefore done her a double service. This form of extra i-enuineration, 
the cost of which in the opinion of some witnesses would be justifieil by 
the services rendered, is ultimately of much greater value to the nurse 
than its cost to the Hospital, and even, since she herself has to pay a 
contribution from her own salary, than her own estimation of its present 
worth. She gains a real benefit, material and moral, in the encouragement 
to thrift, without being in any sense overpaid, while the Hospital itself, 

c 



34 



THE KXISTING PROVISION AT LONDON HOSPITALS. 



RECOMMENDATION AS TO YOUNU NURSES. 



35 



if we may argue from the results of other steps that have been taken 
fi*oin time to time to improve the position of the nurses, will benefit from 
increased efficiency. * 

104. Such a method of joint provision is especially suitable in the 
present case, because, it being the general intention that pension policies 
thus set up should enure for the absolute l^enefit of the assured, they could, 
and in most cases would, be maintained by the. nurse herself throughout 
her career when she leaves Hospital service for private or any other form 
of nursing. They are also capable of being transferred with facility to 
any other institution employing her and willing to assume liability for the 
employer's share of the annual cost. The affiliation system, if universal, 
would thus tend to abolish the penalty on migration which we have 
seen to bear so heavily in the case of officers, but which, though 
we hear less of it, must in the long run involve even greater and more 
widespread' hardship in the case of nurses. 



Recommendation as to Young Nurses. 

105. We thus arrive at the conclusion that the methods by which 

the desired objects can be attained are so well defined that further 

enquiry into this part of the problem can be proceeded with independently 

of the general pensions question. We recommend that the Hospitals 

should he asked to appoint a small committee, including representatives 

of those already possessing affiliation schemes, representatives of the 

nurses themselves, and possibly representatives of other bodies, to 

consider this matter. The committee should be asked to report on the 

numbers that would be involved, and the effect on the Hospitals' finances, 

if a comprehensive scheme were to be initiated on the following lines : — 

(i) That policies assuring a minimum pension of, perhaps, £25 per 

annum l>e effected for the benefit of all young nurses when 

confirmed in their calling and placed on responsible work — say, 

at the end of the first year of training. 

(ii) That the pension should begin at, say, age 55, with the option 
of securing an increased allowance by postponing retirement to a 
later age, to meet the case of nurses capable of further work. 
On these assumptions the annual cost would be about £6 for 
each nurse. 

(iii) That the original Hospital and every other London Hospital 
subsequently employing the nurse should pay at least one-lialf of 
the premium during service, such contribution to enure for the 
benefit of the assured except in the event of misconduct, or 
other good cause. 

(iv) That every probationer should enter service on the understanding 
that the money for her part of the premium must be provided 
in due course by herself or her friends. 

(v) That on cessation of Haspital service, following the principle 



adopted for Elementary Teachei-s (see par. 254) and pi*oposed 
for Secondaiy Teachers (nee par. 276), the policy should be held, 
except, perhaps, in the case of marriage or any exceptional 
circumstances, for the ultimate benefit of the assui-ed, who 
should be encouraged to continue payment of the full premium 
on her own account. 

106. The proposed committee should be asked further to ascertain 
the cost of such policies from representative insurance companies as well 
as from the Royal National Fund ; and generally to make any suggestions 
for improving and completing this outline scheme that may occur to them. 
The committee would naturally keep in touch with the work of any 
central committee that may result from the recommendations on the 
general pension question which we shall make later, and would borrow 
therefrom any features suitable to the case of the younger nurses. Among 
other points there may be a question as to the type of policy most suitable. 
It would also be necessary to consider which would be the most suitable 
body to exercise the trust involved in carrying out recommendation (v). 
This might be the Hospital last employing the nurse, or an extraneous 
body such as the Royal National Fund or the College of Nursing, which 
we understand is a chartered body. It is obvious that the spirit in which 
this trust is exercised might influence largely the number of policies that 
would be maintained in later life. 

107. It will be seen before we close our Report that the problem of 
applying any pension scheme to an existing staff" is a complicated and 
costly matter. The scope of our present recommendation is, however, 
limited to nurses of early assurable a^es, in whose case the premiums to 
be paid would be moderate. The body of young nurses to be included in 
the scheme is a short service body, rapidly recruited from year to year, 
and even if the scheme were applied in the first year only to those 
probati(mei-s reaching in that year the prescriljed qualifying stage, it 
would in the course of about four years include the whole category in 
question. Thus the annual cost to the Hospitals would soon attain 
the maximum even if the scheme were introduced gradually. 

108. The initiation of such a system as we have outlined need not 
m any way prejudice the position of matrons, sisters or permanent staff" 
nurses who form the permanent elements of the nursing staff's. These 
would be included in the benefits of any complete scheme for the general 
sUff*s, and, in the case of futui-e promotions, by following the excellent 
precedent afforded by Guy's Hospital, any provision already assured in 
the nui-sing section would count towards the ultimate benefit under the 
general scheme. It is clear, moreover, that the permanent elements of 
the nursing staff's have the first claim to consideration, and that no form 
of financial preference, where resources are limited, could he given to the 
more fleeting element. Therefore, though the problem of the younger 
nurses should be regarded as a separate one, calling for early and 
individual investigation, financial considemtions will dictate that the 

c2 



36 



THK EMSTING PROVISION AT LONDON H08PITAIA 



Conclusions as to existing provision for pensions. 



•>4 



scheme proposed for them cannot proceed otherwise than in combination 
with the more imporUint one to be proposed later for the permanent staffs 
genemlly. 

Summary of Conclusions as to existing provision. 

109. Reverting to the main question, the conclusion we have come 
to as the result of our enquiry into the existing provision for Pensions 
for Hospital Staffs is that the case submitted by the Hospital Officers 
Association, as summarized by us in paragraph 7, is, generally speaking, 
made out. 

110. With regard to the extent of the existing provision we arrive at 
the following general conclusions : — 

(i) that the principle of pensions for Hospital employees is generally 
recognized, not as an act of charity but as part of the remuneration 
fairly earned by the officers, though often with the idea of 
rewarding long and faithful service to the particular institution 
(paragraphs 8 to 10), 

(ii) that at six London Hospitals out of 105 from which returns 
have been received this recognition has taken the form of 
the establishment of pension schemes which, while perhaps 
conferring no legal right, do in practice give the officers 
of these Hospitals reasonable security for a pension on 
a basis resembling that of the old Civil Service scheme 
(paragraphs 11 to 10), 

. and (iii) that at the Hospitals without schemes pensions are, in practice, 
usually granted in case of need by the special act of the 
Managing Committee. At these Hospitals taken as a whole 
both the numl)er of pensioners and the scale of pensions are 
proportionately lower than at the Hospitals with schemes, and 
the pension itself may sometimes l>e very small. Nevertheless 
the Hospital Officers Association do not know of any instance of 
a deserving person after long service l»eing left entii-ely without a 
pension, nor has any such case l)een brought to our notice 
(paragraphs 1'), and '20 to 24). 

111. But, as regards the limitiitions of the existing provision, we 
also find : - - 

(iv) that, in the absence of any general scheme, migration from one 
Hospital to another involves the loss of all claim to a pension in 
respect of previous service. This has the effect either of 
discouraging migration or of imposing hai-dship l>oth on the 
officer who migrates and on the Hospital to which he goes, 
e.g., when an enterprising man wishes to leave a secure but 



subordinate position at a large Hospital for a higher post at a 
small one (paragraphs 25 to 37), 

(v) that at most Hospitals, and especially at the smaller, the 
prosjiect of pensions is uncertain, not only as to their adequacy 
and imiformity, but, what is probably more important, as to 
the age when they may be expected. The uncertainty thus 
affects the Hospital officer throughout his career-at the 
outset, when he has to decide whether to enter a service subject 
to this disiidvantage, and towaitls the close, when retirement 
tends to be unduly deferred, to the detriment lK)th of the officer 
and of the institution (i>aragraphs 38 to 48), 

(vi) that in all except the largest Hospitals the grant of pensions to 
superior officers is apt to derange the finances, since the amount 
which has to be paid at any small institution, taken by itself, is 
lai-ge in comparison with the annual charge for salaries and 
wages, and there is no system by which this amount is provided 
for in advance and thus apportioned evenly over the period of 
service of the officer (paragraph 49), 

and (vii) that the foregoing causes have no doubt operated in serious 
limitation of the provision of pensions, as evidenced by the 
fact that the total amount now being paid is much less than 
could be expected in such a considerable body of employees 
(paragraphs 50 to 57). 

112. We recommend to the Executive Committee that information 
as to all retirements or withdrawals from service be asked for in the 
annual returns from the Hospitals applying for grants, together with 
particulars of pensions, if any, granted in connection therewith. 

113. We have considered whether we could advise the Executive 
Committee to initiate a system by which the Hospitals should furnish the 
Fund, by the card method, with particulars not only of the withdrawals 
but of the whole of their staffs, such as would enable the Fund in coui-se 
of time to supply the information for lack of which we were unable to 
form any final conclusion Imsed on pro^Der facts under the foivgoing 
heading (vii). Though the annual work involved would not be gi-eat 
if such a plan were once started, its initiation would make a sensible 
mldition to the work of staffs at present fully occupied, and we think it 
better at the present time to limit ourselves to placing the suggestion 
on record. It will be seen later on, however, that our task of forming 
final conclusions on nmny aspects of the [)ension (question has l>een 
gi-ciitly hampered by the absence of complete statistical information 
as to the staffs (see pars. 366 et seq. ; also 469) and as soon as possible 
the Hospitals should be encouraged to begin keeping such a reconl of 
all employees. To secure uniformity the cards should be supplied by 
the King's Fund. 



38 



1 ] 

III 



ALTERATION OR EXTENSION OF EXISTING PROVISION. 

The Alteration or Extension of the Existing System. 

.n.\^W ^" ^''.^ ^"'^^^' '^"'''^'*''" ^' ^'' '^'^^^^ altemtion or extension (if 
any) of the existing system is desirable we found no difficulty in arriving 
at certain preliminary conclusions of a general kind 



Objects to 1^ aimed at in any General Scheme. ' 
followl^l ^^^^^ ^'^"^""^ conclusions may be set out conveniently as 

(1) that a greater security for pensions and facilities for eariier 
retirement would tend not only to satisfy a legitimate desire on 
the part of Hospital officers but also to improve the status of 
the service and the efficiency of the Hospitals, 

(2) that the object desired cannot be fully attained by any 
development of the existing system, but must be approached 
irom the point of view of a general scheme in which all the 
Hospitals should participate, 

(3) that any general scheme for the Hospitals of London in 
order to be successful, should provide inter alia 

(a) for aggregation of service so as to permit of free migration 
without loss, 

(b) that the pension should be claimable at a stated age, so that 
there should be no inducement for the officer or the 
Committee of the Hospital to continue employment when 
in the interests of either, it should be terminated ; and 
that at a stated later age retirement should ordinarily be 
obligatoiy, 

(c) that the pension should bear an adequate relation to the 
salary and period of service, and should be well secured, 

(d) that the financial provision for pensions should be continuous, 
so as not to derange the finances of the Hospitals, 

(e) that permanent members of the nursing staffs should be 
mcluded in the scheme, subject to the condition mentioned 
m paragraph 108, 

(f) that the weekly wage staffs, except where the employment 
IS casual, should likewise be included ; and also any of the 
female servant class whose service becomes of a permanent 
kind. 

116 When we came to consider the .jucstiou whether it woul.1 !« 
Me to ,„,t.ate a scheme embodying the foregoing principles, we found 
great differences of opm.on between the representative offlcera and the 
representa .ve ( omn.ittees that we consulted, and even among the 
Hospital Committees themselves. The representative officers, while 



preliminary conclusions and remaining problems. 



39 



welcoming anything that would improve the present position, expres.sed 
a decided preference for a non-contributory system, pmviding for the 
fiensions in advance, and they submitted to us a definite scheme luused on 
these principles which had lieen prewired for their dissociation by tlie 
late Mr. H. W. Manly, F.I. A. The smaller Hospitals, not unnaturally, 
expressed apprehension at the prospect of such a definite addition to their 
exiHjnditure and liabilities ; and we ourselves find objections to that 
scheme, as will appear later (see pars. 241 et seq.). The (3fficers 
Association also submitted an alternative suggestion that, in the absence 
of a constructive scheme, the existing practice should be systematized 
and the outlay on pensions spread over the whole body. To that 
course equally we take various objections (mee par. 151). Some of the 
larger Hospitals, as we have indicated, already have more or less 
adequate schemes of their own, and did not, as it seemed to us, exhibit 
any desire to merge these in any combined scheme for the common good. 
We therefore arrived at the conclusion that there was not such a 
consensus of opinion, either on the general principle or as to the type of 
scheme suitable, as would justify us in proceeding forthwith to the 
preparation of any definite scheme of a comprehensive character. It was 
obviously necessary to arrive first at a general acceptance of the need 
for a central scheme and at a clear understanding of the fundamental 
principles on which it should be based. 

117. The Hospital officers then expressed the hope that, if we could 
not i-ecoramend a scheme on lines acceptable to them, and if the Hospitals 
were left to grant pensions without provision in advance, we would at 
least place on record a general opinion as to the principles upon which 
Hospital Committees should proceed in determining the age of retirement 
of officers and the scale of pensions to be granted. They added that an 
expression of opinion coming from King Edward's Fund on that question 
would carry great weight with the Hospitals ; and for that i-eason we 
have had to consider carefully what it means. 

118. We think that the comments we have made on the various 
facts tlmt have come before us are a sufficient index to our ircneral 
opinions, and that it would be inadvisable to go further. It has emei-ged 
pretty clearly from our enquiry that in the matter of pensions the 
inefficiency and shortcomings of present methods dei^end at least as 
much on financial considerations as on varietv of administration. 
If the King's Fund were . to attempt to pn)mulgate any rules as 
to the grant of pensions for which no proper provision had been made 
in advance the effect would be to perpetuate and crystallize the existing 
improvident system, and the King's Fund itself might be involved in a 
certain amount of moral responsibility for the necessary financial provision. 
Any such responsibility would present the obvious danger of being 
transformed later into a material liability. The terms of our reference 
contain no suggestion that the Executive Committee would be prepared 
for this. 



40 



ALTEBATION OR EXTENSION OP EXISTING PROVISION. 



N 



Fundamental Questions to lie settled. 

119. Though we have adverted with regret to the existing lack of 
agreement on the deshubility of a centml scheme, we should add that an 
attitude of hes.tat.on a..d en.,ui.y on the pa.t of the larger Hospitals is 
by no n.eans inexcusable. 0,.r <liscussion.s .showed .-oom for Iegiti.nate 
d.ffe.-ences of opinion not only as to whether previous service at other 
Hosp.tals should be reckoned for pension, but also on such other 
tunUameutal questions as 

(a) whether the pensions should be wholly or partly provided for 
before they fall due, f~ J f 

(b) whether the scheme should provide death be..eflts as well as 
pensions, 

(c) whether the officei-s themselves should contribute 

(d) whether the pensions should be based on the future salaries, 
which are unknown, or 

(e) whether the plan of assuring definite amounts adopted by the 
Koyal National Pension Fund for Nurses would not Ije more 
suitable, 

(f) whether it would be feasible to include in the scheme existing 
othcers, many of whom are ..earing the pension age, or whether 
It must be limited to futu.-e appointments, 

(g) whether it would be feasible to give earlier pensions in the event 
ot disablement from loss of health ; and 

(h) whether and by what means it would l,e possible to reconcile the 
gi-ant of pensions by a central body, and more particularly those 
com.ng under heading (g), with the independence and freedom 
of .ntemal administration to which the Hospitals, and especially 
the great ones, attach much impoi-tance. 

120. It appeared to us that we should perform a more useful 
fnnct.on .f, instead of accepting any responsibility for a system, or 
rather absence of system, which leaves so many fundamental probkms 
unso ved, we could in any way contribute to the solution of tbZ 
problems. We thc^fore proceeded to give some attention to the question 
of pens.ons generally and the .nethods adopted for its settlement in 
other profess.ons and occupations. 

121. To treat such a large subject completely would, of course, be 
far beyond the scope of this lieport ; but we thought it might be 
possible by .selecting examples of the working of di.ferent methods, 

m actual practice. This plan of procedure would give us nmt^rial for 
est ma .ng better m their turn the principles underlying the presen 
me hods and the alternative suggestions that have been placet before us 
and we were not without hope generally that it might lead us by logical' 
steps towards the pi.per answers to the various questions we Lvf " 
out above m paragraph 119. "a * c »ei, 

End of PART I. 



PART II. 



SURVEY OF VARIOUS METHODS OF PROVIDING 
PENSIONS, WITH A DISCUSSION OF TYPICAL SCHEMES 
ALREADY IN OPERATION IN CERTAIN GOVERNMENT, 
MUNICIPAL, RAILWAY, EDUCATIONAL, HOSPITAL 
AND OTHER SERVICES. 




122. In considering the geneml features of any supemnnuation 
scheme, it is well to bear in mind that a most essential ix>int is whether 
the pensions are treated as current expenditure, or are piiid out of funds 
provided in advance ; whether, in fact, a future pension is to Ikj a charge 
on the period in which it is paid, or on the working time in which it is 
earned. In this connection we shall speak of j^ensions of the former 
class US being provided '* in arrear," and those of the latter class as 
provided " in advance." 

123. Another important dividing line separates the non-contributory 
schemes from those in which the beneficiaries themselves make some 
contribution towards their future pensions. A further point of distinction 
is whether the pensions are to be paid on a certain proportionate scale 
relatively to salary and if so whether final or average salary, or .as certain 
absolute amounts of money, or whether they are to be calculated on the 
sums available to provide them. Yet another distinction may he drawn 
between schemes where the benefits are confined to pensions at certain 
ages and schemes which offer alternative benefits such as payments in the 
event of sickness, death, or retirement through ill-health, or even of 
voluntary retirement. All these distinctions appear to us to be less 
fundamental than the method of finance by which the pensions are 
provided, and we propose therefore to take the latter as our main 
principle of classification. 

Classification according to Method of financial Provision. 

124. Thus the various kinds of schemes may be cbissified broadly 
as follows : - - 

Schemes where the pensions are provided 
I. Wholly in arrear, or, as it is sometimes technically expres.sed, 
" by assessment " 

(a) on a salary percentage Imsis or scale (i.e., where the pension 
bears a defined ratio to the salary), as in the case of the 
Civil Service and certain of the existing Hospital schemes. 

(b) on a fixed "absolute " scale or ' flat rate" [i.e., in definite 
amounts of pension), as in the case of the State Old Age 
Pensions. 



P ; 



42 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



CLASSIFICATION ACCORDING TO METHOD OF PROVISION. 



4J 



II. Partly in advance and partly in arrear 

(c) on a salary pei-ccnt^gc saile, as in the ause of the Police, 
the Poor I^w OIHcerH, and the Asylums Otticers Super- 
annuation Acts, and various of the Metropolitan lioi-ough 
Schemes. 

(t1) on an absolute scale or flat rate. 

(e) on the - money purchase " principle (i.e., where ejich 
13en8icm is directly related to the contrilmtions available 
to pui-chase it). 

III. AVhoUy in advance 

(f) on a salary percentage scale, as in the ca^ of many 
superannuation schemes of liailways, Banks and other 
corporations. 

(g) on an absolute scale or flat rate. 

(h) on the money purchase principle, as in the case of the 

Royal National Pension Fund for Nurses and the 

Federated System of Superannuation for Universities 

It may be remarked that schemes under heading I are necessarily on a 

non-contnbutory ba^is. Under headings IT and III they may l,e either 

non-contributory or contributory. 

125. It will be noticed that two of these principles are illustrated in 
schemes already in operation in connection with Hospital service ; the 
pnnciple of the Civil Service pensions, on a salaiy scale but non- 
contnbutory and provided in airear, having been adopted by most of the 
Hospitals that have schemes, while the money puixjha^e principle of 
providing m advance such pensions as are paid for is the ba^is of the 
Koyal National Pension Fund for Nurses. The scheme submitted by the 
Hospital Officei-s Association, as we shall see later on, comes under 
heading (f) as an example of pensions on a salary scale provided wholly 
m advance-m this case by means of payments set aside by the employer 
without any contribution by the employee 



Importance of this Classification. 

126. We have placed the issue between pensions paid in arrear 
and pensions provided in advance in the forefront of our ai^ument and 
lave made it the basis of our classification lai^ely in order to emphasize 
the importance of facing, at the outset, the fact that a pension has to be, 
ni some way or other, provided for. This may sound too elementary to 
^ be worth mentioning, but the failui^ fully to recognize it is at the root 
ot many proposals to promise pensions without making provision for the 
cost, or, when provision has been made, to ignore actuarial warnings and 
to increase pension benefits or reduce the contributions on the strength of 
the apparent magnitude of the existing assets. The Hospital Officers 
Association very prudently avoided elementary dangers of this kind by 
placing the preparation of their suggested scheme in the hands of an 
eminent actuary. 



127. In the case of a typical mutual scheme for pensions provided 
in advance, a fund is gradually built up by means of the contributions of 
employers or employees, or both, which fund must be at any given 
moment ade(|uate, with the ad<lition of the future contributions fiH)ni or 
in respect of the existing individual members, and the future interest 
accruing, to provide the future j^ensions of those members, without 
drawing to the slightest degree upon the contributions to lie received fi-om 
futui*e new members. It is obvious that, even if the number of memliei's 
remains stationary, the fund will gradually but steadily grow until the first 
pensions begin to be paid, and even for some time after that ; while, if 
the number of meinl)ers increases, it may continue to grow indefinitely. 
But, however large the fund, it will, if the benefits and contributions are 
properly proporticmate, be at any given moment no larger than is requii*eil 
for the purpose of meeting the liabilities which, though only to l»e 
discharged in the future, have nevertheless alrciidy been incurred. That 

• is, the present capital value of the fund i-epresented by the a^^^ets 
and the value of the future contributions of the existing membei's, will 
be equal to the pi-esent capital value of the liabilities in respect of those 
menil)ers and existing annuitants, if any. The present value of the 
contributions of the existing meml>ers depends on the rate of contribution : 
on the rate of change of salary on which the contribution is calculateil ; 
on the number of years during which contributions will be paitl, 
which depends on the present ages of the members and the age at 
which contributions cease ; and on an estimate of the future rate of 
interest obtainable. The present capital value of the liabilities depends 
on the rate of pension (which generally depends on the rate of inci*ease of 
salary) ; on the age of retirement ; on the numljcr that will reach that 
age ; and, last but not least, upon the probable age at death of tlu>se 
who do reach it. It will be seen that the uncertain elements in a 
fund of this type are far more numerous than in the case of a life 
assurance society. The effects of these factors cjin only be calculated 
actuarially. Without an actuarial valuation, therefore, the adequiicy 
of the present capital value of the fund to meet the present capital 
value of the future pensions cannot be ascertained ; and in any event 
many of the factors are so uncertain as to render exact ciilculations 
impossible. 

128. In the case of pensions provided wholly in arrear there is no 
capital fund. The pensions as they fall due will be paid out of income 
then to be received. But this tact by no means relieves the promotei-s of 
the necessity of calculating the liability and of considering the <|uestiou 
of the provision that will have to l^e made for meeting it. The future 
liability can of course be expressed in terms of present capital value in 
exactly the same way as in the case of a scheme provided for in advance. 
Or actuarial estimates can be made to show either the incidence of the 
actual payments from year to year in the future, or the equivalent average 
amount taken over a series of years. Until this is done the probable 
adequacy of the future income, to provide the pensions as well as current 
expenses, cannot be estimated. 



44 



Sl'KVEV OK VAmoVS MKT„o„.S O, PKOVID.NC PE^srONS. 



! 



! 






/ 



/ 



129. In discussing the .letails of the various n,Ptl,n,lc ^r 
pensions we shall have occasion to ,^fer to th 7 !!• u^ '*''"*'' 
of the liability incur...!, as Jn^^'V" "'""""'""' 
future, available to meet it l!!m i , '■'^•''"'"•<=««' P-^sent or 

pe..sio„s provi.le.| in d ih. . ''''"'' "'"' '" ^'"' ^"^'^ «f 

pensions Spends o ti I ', i tv", ft """•' '""■ "" '"-™*"* "^ "■« 
ofsuflicie„tL.„,etr„'tr^ km'- '"^'f''' "''*'" ^''^ "'""^ <^"--. 

cur„,„t expenses oJhTS tt.?. t '" "' "" '"''" '" "«" "« »•■« 
in this .*sLt ij^^ween . i !" ' P*^'""'- ^he p.m>tical difterence, 

and a scheC . elX t ^ ?^^^^^^^^^ ""'" "^ P"'"- Venues l.hindi^ 
charity is obviouT I sel ""»"'«"""«« "^ income fi-om voluntaiy 

uncertain the ^Lon fu ," T'T '^' ""'" '"^ '"'""' '"-»« '« 
provided in advance ^'' ""^ ''^"''^ "^ «««""^y' »>»«' be 

advance by metnst l„trib r .' '""^' "'* "" *° P'^^'''^ P*'""""" -' 

alternatives The InSr " ^' ^"^P^"^' '^'"^ «'^ ^'^'^^ P^>««iWe 

to increase) w^t^^^^^^^^ Z S f T' 'r '"''"" ^"^^^'^ "^^-"^ --- 
difference wiirlll t? / " /'f P"""'"" ^"'"^ '^ '^ P^'^ ^^e 
the pension fun^t^ ;^^^^^^^^^^ with which 

to the extent to which this fhiTu . ^ recognized clearly that 

to be provided in a W^^^^^^^^ ^'^^^^^ ^^^ -*^-- ^^-es 

all the insecnritX^ a^^^^^^^^ T' ' f *''"' ^'"^'^^^^ ^" «"^^»^ -ith 

financial resCe fr^^^^^^ h ' "'r' " ''^ "'^^"^^ ^^ -^--' 

if the causo nfZ ^ , ^^ P^"''^" ^^^^^^ «*" ^e met. Moreover 

of the gua~eirLv ^"T 7''' ""' '^ ^"^"'^ ""'^«« '^^ '^^oun.es 
guaranteeing body are not only well assured but elastic. 

deficilfLt^:!:^:::^;^^^ -thodsof meeting a 

tbat of decreasinTtrii'^^^^^^^ ^' ^"^^^^^'^^ ^ -P^^^- or 

remains one of i foi™ ,' f 1'"^'"" "'" ^^'"^'^'^^ ^"^ ^^^ ^^^eme 

contributions of ^t ^^^^^^^^ ^7^ ^"^^^^-^ — ly, that the 

sum or -lary percentag h" ^^^^^^^^ ^'^.^^ %«- ^>^ ^^ «-h1 

and the pensions have tn fact to ZT ^ . , ' "" ""^ '^' contributions 
.evoHlcMl by the vahiat on^^ T^^^^ '^acljusted to meet the ciix^umstances 

a ix^nnaneiitiy VxtCi of . Tf '""' " '^"' '^''' '^'^' ''^'^^^^~- 
I-nsions, andVrfe" ec^ritv T TT.'^ a permanently fixed sa.le of 

"-gin for coE'e J: IT^^^ 

h icies, eitner m the original scale of contributions, 



FINANCIAL EFFECT OF MINOR DIFFERENCES. 



45 



which would be inequitable if not ultimately wanted, or in the form of some 
certain and elastic source of future guarantee. If in the absence of this 
the pension is fixed, the contribution cannot be permanently fixed, unless, 
as already suggested, very much on the safe side. 

132. It is for this reason among others, and in order to minimize 
generally the incidence of uncertain elements, that, in some of the 
schemes where provision is made in advance, recoui-se lias been liad 
from the outset to the method known as the money purchase system. 
Under this system, while the contributions may increase as the sjilary 
increases, the pen.sions promised will increase, not in proportion to the 
increase of salary, but according to the amount that can be purchased 
with the increased contribution as estimated by actuarial calculation. 
By this system, when carried out by means of a mutual fund, a provisional 
adjustment of pensions to contributions is effected beforehand, and some, 
but not all, of the elements of risk we have discussed in the last few 
jmmgraphs will be 'eliminated. Greater security for the resulting amount 
of pension is thus attained. An outstanding distinguishing featui-e of 
this money purchase method is the fact that it also adjusts itself to the 
purchase of definite benefits from external institutions, such as the Koyal 
National Pension Fund or general insumnce companies. Where the 
financial results are thus definitely guaranteed by an approved impoi-tant 
company with a large capital they may, from the point of view of .security, 
l)e regarded as very well assured. 



Influence of minor Differences between Schemes. 

133. The method by which the liability involved is provided for is 
thus the fundamental feature in any pension scheme, and it is from the 
experience of the working of the various schemes in this respect that their 
l)earing on the problem of pensions for Hospital ofticei*s is chiefly to 
be sought. There are, of course, numerous minor differences that 
will emerge in the course of our descriptions of ditterent schemes 
— differences in the length of service ciualifying for a pension, in 
the age of retirement, in the proportion of contribution, if any, 
to salary, in the relation of pension to salary, and in the existence 
or non-existence of l)enefits alternative to pensions, such as deiith benefits 
or allowances on retirement l)efore the age of superannuation. These 
differences, and even the great dift'erence between contributory schemes 
and non-contributory, are found in every case to produce some effect on 
the Mance between assets and liabilities. It will be seen that this ettect 
may not only l>e direct, as when alternative benefits are ottei*ed, or 
when, by a reduction in the retiring age, the pension liability is increased 
and the receipts from contributions reduced. They may also be indii-ect, 
as when the fact of an employee's contril)ution gives rise to a chiim 
to some l)enefit or to the return of his contributions on resignation ; or 
when the provision of a pension, acting as a relief to the fund from which 
current salaries are ptiid, encourages early retirements of otticers at the 



k\>. 



46 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



'i 



expense of the pension fund ; or when there are i-apid increases in the final 
salaries on which the pensions will be calculated. In fact it is obvious that 
in almost any mutual fund there may be a conflict between the interest of 
the employees in securing the most favourable terms of benefit ; the interest 
of the employers in settling the rates of salary, the age of retirement and 
the rate of pension offered in the manner most calculated to promote 
efficiency ; and the interest of both in the financial stability of the pension 
fund. This being so even in a simple self-contained concern, it is easy to 
see that difficult questions would arise in the case of any federated 
scheme involving several separate employing l)odies, if pensions were to 
be provided jointly for employees whose terms of employment wei*e 
determined by each employer independently, 

134. Many of these points, and the way in which they have been 
dealt with, will be illustmted in the following discussions of existing 
schemes, and of the bearing of these schemes on the problem of pensions 
for Hospital officers. 



I. PENSIONS PROVIDED WHOLLY IN ARREAR. 

13.'). The outstanding examples of this method are naturally those 
of the State in the case of Civil Service pensions under the Superannuation 
Acts of 1859 and 1909 ; and of the Old Age pensions now paid by the 
State after age 70. To these have been added, since the commencement 
of our enquiry, the enormous payments for naval and military pensions 
for which the State has assumed responsibility and which far transcend 
its previous pension liabilities. 



(a) On a Sai^ry percentage Scale. 
The Civil Service System, 1859 and 1909. 

136. Under the Act of 1859 the superannuation allowance to be 
granted to established civil servants *' whether their remuneration be 
computed by day ptiy, weekly wages, or annual salary" was to be, 
after a minimum of ten years service, one-sixtieth of the annual salary 
and emoluments for each year of service with a maximum of forty-sixtieths. 
No person could be pensioned l>elow age 60, and there were various 
powers reserved to the Treasury for granting special amounts in special 
cases and gratuities in cases of premature retirement through injury or 
infirmity. In practice, the scale pension has been awarded in all cases 
of ill-health ("inculpable inability "as defined by the Treasury) or reduction 
of stiiff; with reduced allowances in exceptional cases of retirement 
through inefficiency. 

137. We find it recorded by Mr. J. J. M'Lauchlan, a Scottish 
Actuary, that " the Civil Service Superannuation Commission of 1857 
" recommended the abolition of the deductions that were formerly made 



t« 
ti 

4( 
(i 
(( 

ti 
ti 



PENSIONS PROVIDED WHOLLY IN ARREAR. 4< 

from the salaries of many civil servants. They were of opinion that 
the remuneration of the civil servant should be described as consisting 
partly of salary and partly of superannuation on retirement. They 
state that the existence of a fund creates an erroneous impression as to 
the real nature of the transaction. The widows of deceased civil 
servants had made claims on the Government, on the ground of the 
deductions made from their husbands' salaries. It necessarily raised 
questions as to the sufficiency or insufficiency of the supei-annuation 
allowance, considered as an equivalent for the deductions paid."* 



138. As we shall presently see, the Commission of 1857 ha.s not 
been justified by experience, for the later tendency has undoubtedly l)een 
in the direction of providing for pensions in advance. Nor were they 
more fortunate in their suggestion that the mere absence of a fund and of 
contributions made by way of deduction would settle the question of the 
widows, for it was principally that question which led to the revised 
scheme of 1909. 

139. This scheme, involving the introduction of a death l)enefit into 
the other system, was adopted in response to a continuing contention 
that pensions should be regarded as deferred pay, the whole benefit 
of which should not lapse in case of death. The questions at issue 
were investigated l)y a strong Royal Commission, presided over by 
Lord Courtney {see Cd. 1744 and 1745), the main argument of the 
civil servants being that the official scale of salaries involve<l a virtual 
contribution on their part which was in excess of the amount required for 
pensions, and which, therefore, entitled them to death allowances in 
addition, and as of right. This contention apparently confused the 
difference between the cost of pensions in advance and in ari*ear and wtis 
ruled out as fallacious. The Royal Commission proceeded to lay down 
the general principle " that a deferred pension is remuneration for services 
" as much as an immediate money payment ; but it is, in part at least, 
" remuneration for continuity of service contingently payable on the 
*' continuity being maintained during a defined perio<l and not accruing 
" from year to year as an indefeasible interest." 

140. Subject, however, to preserving the principle of continuous 
service the Royal Commission, while not empowered by their reference to 
admit any claim involving additional cost, disapproved of a system under 
which the benefits returnable for the implied contributions .should 
be limited to retired pensioners, whilst no benefit inured to the 
representatives of those who died in the service. In fact, they considereil 
it would be advantageous for the service that "the contingent 
*' remuneration pmvided by the State should be so armnged as to 
" meet as large a number of the ordinary chances of life as possible." 
A minority reix)rt was pi-esented by Sir Ralph Knox and Sir E. Brabi-ook. 
who adhered to the more conservative idea of a pension as the reward of 
long and faithful service and objected to any recognition of the " deferred 

* "The Fundamental Principles of Pension Funds," C. & E. Layton, 1909. 



48 



SURVEY OF VAKI0U8 METHODS OF PKOVIDING PENSIONS. 



THE CIVIL SERVICE SYSTEM. 



49 



I 



■ " pay " principle. They followed the Commission of 1857 in preferrins to 
leave provision for widows and child.^„ to private thrift. 

a« Jii^' ^ ^""'"'"^ f '*"'' ^^^ """■" P^vi^o"* of the revised scheme 
m hl^fh •".*''« S''P«'*"n"«tion Act 1909 were as follows :- 

to m^P J'.P'^P"'^"'" f th« annual «»lary and emoluments to be gmnted 

letirement after two years service (wh'ich would include cases of 

serTS H °L ^l''"■"'«' ^"'''■y' «t«- "'"Itiplied by the number of yea,, 
serv ce ; and (,„) that on death aft«r five years service a gmtuity of one 

SLl"^ '""''" "^ ^"*"'^- '^''^ -- «'- P-vl^ions enahhng 
ex,st,„g cv,l servants to change from the old scheme to the new one 

It twtrf *''^"«^P■•-■-- - popular in the service and 
that they have l,een very largely accepted by the existing civil servants 
wuh whom it was quite optional to adopt them. ' 

of flT' Ty T.T *"'"'* "'"' ""y ''''*"*™' ^''"•"a'e >»«« l-een made 
of the capital Imb.hty of the State for Civil Service pensions, and Z 
have a ready found taee nnr m\ h... .i. . i^"a"»ii», ana we 

m«,«nr. JV * P* ' *' ""* endeavour to find even some 
measure of .ts current cost has exhibited confusion of thought and 
anguage^ The p,-oceedings of Lorf Courtney's Commission show that 
thus confusion was largely responsible for the dissatisfaction in the 
service with which they were called upon to deal. 

standi!!" '""*" '"'*'«'««'"''<=«o''. '-hich was widespread 'and of long 
standing, appears to have been base<l on a belief that the State wa! 
virtually deducting from the salaries from 16 to 20 per cent anHiara 

exist^^rsll!f ""*' """"■ '"'^'*"'"^'*'' '■» "''"'"on to the 

existing scale of superannuation. This l,elief in turn rested mainlv on 

an answer given I_^ Sir Fi,.ncis Mowatt, the Permanent Secret^J of 

the Treasury, to the Ridley Commission in 1886, and also on a Ster 

rom the treasury to the Boa»l of Tn.de in ,891 stating that "the 

"reZrof ?'""""''; '■""• '"""''"*'"* appointments, Without any 

" c W 1 1"''. '",7'^"^ "" """""'" "f '^' to 20 per cent, to the 

ch,irge. Sir Fmncis Mowatt's supposed .statement is .«ited in the 

following extracts from his examination by LoH Courtney's Commission - 

..aver e ^^^^^Z^t^S^Z^^ T-^.T' ^°" "---'"■^ 

4060 tLv *"" '^"''* arithmetical calculation ?- No. ' 

hardly even sav thlt" Vh '""^^^ ''^^**" °' ^^*' '^^ ^*^"« '«?-! »« afraid I can 
even ^f Ihe ^aJtic'dar Jen rSe'ft Te^^l^'^P^ ^^"^f ^*^i '^« circumstane" 
not think I can go nearer thin tht [hat ?w '"^ ^ly any definite rule. I do 
from the "on-pensionabirpart of thr^^l^^^^ years when we have moved men 

we have usually reduced their mvbv^nT.fl- ^ ^""onable part of the Ser>ice 



they are promoted, say, from the third class into the second class above them that 
deduction terminates, so that practically it is very much under the 10 per cent. 



* 



4133. (Mr. Morton.) And I think you, on a former occasion, in the year 1885 
— or was it 1886 ? — you stated what your view was with regard to the amount of 
the deduction that might be presumed to be made from salaries in consideration of 
the pension that would be arising at the age of 60 or 65 years ? — No. I think not. 

4134. I cannot affect to regard consistency as the highest virtue in man, and 
therefore it is not a point that I desire to press too far, but as a matter of fact I 
think you did say, did you not, that it might fairly be considered that a reduction of 
from 16 to 18 per cent, was made from salaries in consideration of the prospective 
advantages of pension ? — No. I think not. 

4135. Then I have been under a misapprehension ? — I think I see w^hat you* 
must be referring to. What I said to the Committee was that I thought the 
pension charge amounted to from 16 to 18 per cent, in addition to the salary, but I 
never suggested that that 16 per cent, was a deduction from the salary. 

4136. The words which are given as yours were in answer to a question from 
Lord Lingen. Lord Lingen asked : " If we took as a rough test the proportion of 
pensions to salaries, is it not the general opinion that about 20 per cent, of the 
eflfective represents the non-efifective charge ? " You replied : " I have made 
calculations myself, but they have never been complete, and I could not support 
them absolutely. But I should say, from my experience, that you would find that 
the non-eflfective charge was about an addition of between 16 and 20 per cent." ? — 
Yes, but you will observe that there is no reference to deduction there. 

4137. No, that was my fatdty manner of expressing what I thought you 
meant ? — I beg your pardon. 

4138. And you went on to say in answer to the following question by 
Mr. Harvey : " Do you mean that if a Civil Servant, entering, under the ordinary 
conditions, has £100 a year salary, the real charge that the State has to undertake 
for him under the present system is £118 a year ? " In answer to which you are 
reported to have said : " I should say at least " ? — ^That again has no reference to 
deduction. 

4139. No ? — No, but I am bound to admit that as that answer stands, I do 
not think quite as it was given, it is a little misleading. 

4140. Yes ? — I meant no more than this, that the pension charge of an officer 
might be taken roughly at 16 to 18 per cent, in addition to his salary. 

4141. Quite so, I should be very sorry indeed to press my statements unduly ? 
— I am most anxious to give you every information, because I am bound to say I 
have not changed my mind since ; what I said then I think to-day with my added 

experience. 

****** 

4184-85. {Mr. Bunn.) I was under the impression that the answer of Sir Francis 
was at that time to a question : '• Then you consider that the pension is deferred pay ? " 
I think you said " Yes," or something of that kind? — No, my impression is, I think 
you will find, I explain what I think is deferred pay. My own definition of deferred 
pay, which perhaps you will allow me to give again with reference to this, is really 
this, that there is no doubt that a part of a Civil Servant's remuneration is deferred 
pay in this sense, that it is remuneration which is deferred from his immediate 
salary, and applied towards granting him a pension. In that sense, and within the 
conditions of the Service which he joins, that is a deferment from his actual 
remuneration ; if there were no pension he would no doubt get some more pay. 

*a* .t* .•> .*« »•« 

*fi -i» *,. »,. -,» 

4196. Now I suppose you adhere to that opinion, or to the result of that 
calculation, that the cost of the pensions is about 16 or 18 per cent. ? — I expressed 
that, you see, with some modification. " * I should say that the pension 

charge on what I must call a normal establishment, that is on an establishment 
which has not changed in numbers since the pensioner entered the service, you 
would find about 16 per cent., from that upwards. 

****** 

4201. Well, now, that will bring me to the second argument, which I under- 
stand to be, if the 16 to 20 per cent, was paid in wages, and the men were allowed to 
make their own provision, that they could make a much better provision than you 
make for them with the money ; are you aware of that?— Yes, I am aware of that. 

4202. Well, then, what becomes of the argument that the pension that you are 
now giving, which is the cost of the deferment, is adequate ? — Pardon me, I have 
not made myself clear, I am afraid. 

4203. No ? — I do not by any means say that we deduct from the market rate 
of wages 16 or 18 per cent. I say that we deduct from the market rate of wages a 
very much smaller proportion than 16 per cent., but I say that we give a pension 
which to the particular man who gets it is 16 per cent, of his salary charge. 

^t "*' *''» JU ^b W^ 

-•» •*- '.« !^ tge :6e 

4251. (Mr. Dickinson.) Just go back to this question of the 16 per cent, for 
one moment. I understand you have said to-day that you do adhere to your own 
opinion that 16 per cent, of a man's salary is what the State requires in order to 



•mm 



50 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



THE CIVIL SERVICE SYSTEM. 



51 



provide him with this pension? -What I said was that the pension charge of a 
normal department is fully 16 per cent, of the salary charge. 

i^^?\ o ®^' ^ wanted to get it exactly. Then you do not say that 16 per cent. 
18 what the State would require to provide him with the pension ?— No. 
* * * « * « 

4258. Now, does the principle of reducing salaries by a certain amqunt 
representmg tlie value of the pension hold good all over the service?— I beg your 
pardon, I do not quite follow. ' 

4259. When you take a man on the established service, does that principle of 
reducmg hia rate of pay by a figure which is supposed to represent proportionately 
Ills pension rights which accrue to him, hold good all over the sei-vice?— We do not 
very often take in men from the outside, you know. When we do, a deduction is 
made, but it is not a deduction which is sufficient to supply the pension. 

^'^^- I^ 'las been stated, or at any rate it seems to be the impression of some 

?!; f .^»^ ^^'® ^'*^® *®®"' ^''**' *''^ Treasury has a system of deducting at least 
iO to JO per cent, of a man's pay when he goes on to the established capacity?— 
1 never heard of such a case. 

4261. You have not ; I wanted to put it to you ?— No. 

T f^^f^ii ^^'^ Alexander Hetulerson.) There is a suggestion— I do not say a 
distmct allegation, but a suggestion- in the circular of the Deferred Pay Committee 
that whereas the Government deduct something approaching 16 per cent, in the 
shape of deferred pay, the railways and otiier similar institutions manage to give 
very considerable, if not as great lienefits— greater in some cases than the 
Government do -for a payment of something approaching 5 per cent. Am I right 
in assuming from what you have just stated in answer to various questions that 
there is no analogy between the 16 per cent, that you have alluded to and the 5 per 
cent., or whatever the other amount may be, that is put by in the shape of a fund 
to accumulate at interest ?— No, not in my opinion. 

4269. There is no connection between the two ? — No. 
1 1 ^?.70- ,T^®^®f**™ when the suggestion is made that the Government is 
deducting tins large sum, and that the beneficiaries are not receiving those benefits 
that they might be entitleil to, that is an incorrect statement ?— Yes. 

4271. That 16 per cent, is the proportion that the non-effective bears to the 
effective salaiy ? — Yes. 

4272. And has nothing whatever to do with the fund that would have to 
accumulate at compound interest to produce the benefits ?-No, nothing whatever. 

427d. No connection whatever between the two?— No, no connection. 

♦ :!: ;|: ;;: ;•; ... 

144. Tliese extracts show the grounds on which the Commission 
ruled out the contentions of the Deferred Pay Committee as ba«ed on 
fallacy. It must be admitted, however, that the vagueness of official 
facts and opinions on the subject, and the want of precision of language in 
stating them, very largely justified the agitation headed by that Committee. 
The final answers of Sir Francis Mowatt make it clear that the official 
estimates of 16 to 18 per cent, (see also Sir W. Byrne's evidence quoted 
in pars. 53 and 160) are intended to be a rough and average measure of the 
current charge when paid in arrear, and not, as the Deferred Pay 
Committee had thought, the value of the pensions calculated by way of a 
percentage of the salaries deducted in advance. It still remains obscure, 
however, why the Home Office (see pars. 54 and 160) should levy in cash 
extra charges on this principle when police are lent for special purposes. 
The recent appointment of a Government Actuary may perhaps lead to 
further and more precise information being available in time as to the 
cost of Civil Service pensions. As matters stand it will be seen that we 
are met, at the outset of our enquiry, not only with an absence of proper 
State statistics on the question, but with a general sense of confusion in 
matters easily capjible of clear and precise definition. Our own enquiries 
will be found to show that the real co.st, whether reckoned in advance 
or in arrear, of pensions on the Civil Service scale depends not only on 
the elementary consideration as to whether the body concerned is 
increasing or decreasing, but also on the rates of withdrawal, of disable- 



ment and of longevity, and other factors which must vary greatly in the 
vastly different services of the British Government. 

145. The Royal Commission examined 17 witnesses representative 
of different grades in the service, and almost without exception they 
pleaded strongly for help for widows and orphans. This feeling was no 
doubt largely responsible for the contention that pensions were defeiTcd 
pay accruing as of right. As one witness put it, "governments and 
" companies paid pensions not for charity but to secure good servants ; and 
" the contributions if any from employers were simply a portion of the 
" man's wages paid year by year for a specific purpose." Women, it was 
argued, got gratuities on leaving to get married. Some, however, were 
willing to accept reduced pensions that their dependants might benefit ; 
others would have preferred an additional and compulsory levy for death 
benefits. There was general agreement among these that life insurance 
would he better than a widows' pension fund as the latter would be 
objected to by unmarried men ; and the feeling was said to be prevalent 
that the insurance should cover death during the early days of a pension 
(i.e.f before the beneficiary had time to receive much benefit from it). 

146. Mr. A. M. Leveaux, F.I. A., an actuarial witness called before the 
Commission, estimated that in the case of a typical civil servant in the fii-st 
division the value of his pension represented from 8 to 10 per cent, of the 
value of his pay, according to the rate of interest used. In the second 
division, the pension would represent about 10 to 13 per Cent, of the pay. 
Another synthetic estimate of this kind has been quoted already (see par. 54). 

147. Another point we may note before leaving the Report of Lord 
Courtney's Commission is the large number of retirements from ill- health 
(see Cd. 1745, par. 192). In the service generally, including War Office 
and Admiralty, there were 3,177 cases in 10 years against 5,374 
retirements from age ; but in the Post Office they actually largely 
exceeded the retirements from age, being 3,408 against 1,719. It will 
be necessary for us to discuss the question of retirements from ill-health 
later on, and these figures appear to be so exceptional that we record 
here the summary of the numbers retired in the 10 years ended 
November, 1891, as given in the Report : — 



Department. 


Age. 


ni-health. 


Abolition 
of Office. 


Total. 


Civil Service generally, excluding War Office, 
Admiralty, and Kevenue Departments 


1,507 


1.230 


93 


2,830 


War Office 


763 


308 


346 


1.417 


Admiralty 


1.779 


1,104 


18 


2,901 


Customs 


721 


190 


24 


935 


Inland Revenue 


604 


345 


10 


959 


General Post Office 


1,719 


3,408 


16 

1 


5,143 


Total 


7.093 


6,585 


507 


14,185 



v2 



'.^m 



I' t 



52 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



The existing Hospital Schemes. 

148. From the particulars already given it will have been seen that 
most of the pensions hitherto granted by Hospitals, either under a settled 
scheme or after consideration of individual cases, are based on Civil 
Service terms, more or less modified. If every Hospital were in a position 
lx)th legally and financially to give and guarantee such pensions, and were 
to admit the right of its officials to them, their chief ground for discontent 
would l>e removed, subject, perhaps, to the introduction of some mutual 
provision for reckoning service at other Hospitals as giving an equal 
claim. But it is obvious that the superannuation liabilities of the State 
represent an enoi-mous capital sum and that it would be a serious thing 
for charitable institutions, not only insufficiently endowed but often without 
legal constitution and with very questionable powers (see par. 12) of binding 
their successors, to assume similar financial responsibilities. 

149. It follows from this that even if all the Hospitals felt 
justified in promising the pensions, the officers would not derive 
from any such general undertaking that sense of security, both 
legal and financial, which they particularly desire. The men principally 
concerned are precisely those who are aware of the constant strain 
and uncertainty of raising the annual income of the institutions ; and 
it is a not unnatural thing that they should look to see the provision 
for their own old age secured upon some more solitl foundation than the 
fluctuating income, perhaps thirty or forty years ahead, of a charitable . 
institution proliably unendowed. One official who was l)efore us 
volunteei-ed that he would willingly foi-go his purely gratuitous benefit 
under the scheme of his Hospital (one of the lai-gest and l»est established 
though not as fully endowed as some) and would enter a contributory 
scheme if thereby he could get absolute security.* 

150. We have already mentioned (sf*e par. 117) a suggestion 
submitted to us by the Hospital Officers Association that, failing a 
more definite scheme, a scale of pensions nn'ght be agreed upon by the 
Hospitals ; and that when the pensions became payable, instead of being 
charged on the income of the indivi<lual Hospitals concerned, the 
payments should l)e pooled as it were and the total charge spread 
over all the Hospitals in the scheme. The pensions would be paid 
perhaps by a central committee, which would levy a rate upon each 
Hospital for whatever sum might be needed from year to year. 
Subject perhaps to some necessary adjustments for the nearness or 
remoteness of heavy pensions in individual institutions, there would 
seem to be nothing financially impossible in such a device, which 
could also be adapted to cover the principle of aggregated service in 
different Hospitals. 



THE EXISTING HOSPITAL SCHEMES. 



53 



* This sentiment was found to be prevalent among railway clerks by Lord Sbuthwark's 
(rC'aixVin • """'' ^- ''^^ ^ *"""^ ''' Motropolitan'liorough offiJl' 



151. In practice, however, difficulties would occur such as we shall 
meet with later on in other mutual systems. It is difficult to see how 
the greater Hospitals could delegate to any central committee the question 
whether officials should, in the interest of efficiency, l>e retired for ill- 
health or other causes, or how the central cummittee in turn could avoid 
raising (|uestions concerning salaries with the Hospitals. Unless the 
committee applied its principles very rigorously there would l)e frequent 
temptations for individual institutions to transfer undesirable officials to 
the comuKm chai-ge, and the absence of separate responsibility would 
pmbaljly end in corporate extravagance involving a high i-ate of levy for 
the fjensions. In financial principle such a scheme is indistinguishable 
fi-om the existing Hospital schemes. While it would in pi-actice assist 
the smaller Hospitals by equalizing a charge which would otherwise 
weigh heavily at certain times, and would undoubtedly improve the 
security from the point of view of the officials, it is open to the same 
serious objection that no provision would be made in advance for the 
accruing liabilities of the future. It will be seen before the close of our 
llepoil that it would be impossible for us, if only on the latter ground, to 
take it on ourselves to recommend the extension to the Hospitals 
generally of the principle underlying the existing schemes. 

(b) On a Fixed Absolute Scale : Old Age Pensions. 

152. An equally simple form of scheme is that by which the State 
provides in arrear fixed pensions on an absolute scale or flat rate for all old 
people ; but it has no direct bearing on the present enquiry, as the positions 
and emoluments of Hospital employees vary within very wide limits, and 
any scheme suitable for them must not only avoid payment in arrear but 
must provide benefits equally various. 



II. PENSIONS PROVIDED PARTLY IX ADVANCE AND 

PARTLY IN ARREAR. 

153. We now approach the consideration of schemes where the 
benefits are to be provided for [mrtly in advance. In the case of schemes 
of the Civil Service type which we have had under notice, there is no 
question of any contribution by the beneficiaries. As regards the schemes 
we are now coming to, however, they may be constructed upon either a 
contributory or a non-contributory footing, though in practice it will l)e 
found that they are usually on the former basis. 

(c) On a Salary Percentage Scale. 

154. Thei-e is, as we have said, no reason why a scheme for pmviding 
[xjnsions pailly in advance and partly in arrear should not be financed 
entii-ely by the employer. For instance it is a not uncommon thing to see 
in the accounts of banks and companies that large sums are carried fi-om 



54 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



time to time to reserve funds for superannuation purposes. This means 
that the mstitution, though desirous of keeping the grant of pensions as 
a matter entirely within its own discretion, yet sees the necessity for 
making some sort of provision for the liability in advance. 

ly,-). Again, some companies will assume no definite liability and 
make no provision for accruing pensions until they are actually granted, 
and will then provide a lump sum sufficient to purchase an annuity of the 
amount of the pension. The practice is not common, and cases coming 
withm It can scarcely be described a^ " schemes *' or be regarded as typical. 

156. We proceed to some cases of the more usual type where the 
beneficiary is called upon to make a contribution, and we will l>egin 
with the case where the employer makes no attempt to provide his own 
portion of the pension in advance. The well-known pariiamentary 
schemes for pensionfng the Police, the Poor Law officers and the Public 
Asylums officers come under the latter heading. 

Police Officers. 

1 57. The Police Act 1 890, slightly amended by the Acts of 1 906 and 
1908, prescnbes, throughout the scale of pensions, certain maximum and 
nnmimum benefits within the limits of which the local authorities may make 
their own regulations. Thus after 25 years service any police officer in 
Ji^ngland or Wales can claim an annual sum not less than thirty-sixtieths 
nor more than thirty-one fiftieths of his annual pay, with increases for 
lurther service and a maximum of two-thirds of his pay. The "annual 
pay " IS oi-dinarily the final rate at the time of retirement ; or the average 
of the last three years where the officer has been promoted in that time 
A pension on a similarly generous scale can be claimed for incapacity 
after lo yeai-s service, and may be gitinted before that duration : while 
if the incapacity arose in the execution of duty, the pension can be 
claimed at any time. In the latter event something depends on whether 
the disablement is partial or total, but in all causes the scale is more 
generous than that of the "onlinary pensions " already quoted, and may 
be as much as full pay. Even the ordinary pension scale is, it 
will be seen, more liberal than the Civil Service scale notwithstanding 
the earher age of retirement. The age at which oHinaiy pensions 
are claimable is not later than 5o, and may l.e 50, or even eariier if the 
authonty elect to fix no limit. There are also provisions for givinif 
gratuities to widows and children in certain cases; and for counting 
continuous service where a constable removes to another foree or where 
a civil servant has also served in the police force. In the latter event, it is 
interesting to note, three yeai-s of police service are to be reckoned as 
equivalent to four years in civil service. 

158. For these benefits the contribution is a unifomi deduction of 
^=> per cent, from the pay, and this is supplemented by ceitain court fees 
.md fines, etc.. which are to be carried to the pension fund, and by an 



PENSIONS PROVIDED PARTLY IN ADVANCE : POLICE OFFICERS. 55 

Exchequer contribution, though to what extent these help mattei-s we do not 
know. At any rate there is in the case of this scheme a provision for a 
*' I)ension fund," such as it is, into which the various sums alwve specified 
are to l)e paid a.s annual income, and out of which the annual charge for 
pensions, etc., is to be defrayed. The surplus of any year is then to be 
invested in trustee securities ; but apparently when once invested the 
capital must never be applied to"i>aying any sums payable out of that 
fund "—which is a very curious provision. We fear, however, that these 
details will have but academic interest for Hospital officers, because if the 
annual income is insufficient " the deficiency shall \ye supplied out of the 
police fund." There is thus a full guarantee of public money to carry out 
the objects of the Act ; and to meet cases where the police fund is limited 
to a ceitain rate in the £ there is a special provision that that limit may 
be exceeded for the purposes of the pension fund. 

159. In the event of a constable leaving the police service altogether 
it is contemplated that he will ordinarily be repaid his own contributions 
to the fund. There is no provision in the Act for any sort of actuarial 
valuation which would elucidate the amount of the future liabilities for 
which the authorities will in due course have to make provision. That 
amount is likely to be increased by the curious provision alrejidy alluded 
to prohibiting payments out of capital. For example, supposing there 
were very few or no pensions payable during the early years of the fund, 
the surplus to l)e invested would consist of contributions for certain 
pensions to emei-ge in the future ; and yet when those pensions liecome 
payable the contributions themselves may not be used for the purpi>.se. 
The result is that the charge on the rates must be increased. This charge 
must in any event, in view of the very liberal scale of the pensions and of 
the relatively small contributions, be so considerable that we only notice 
the point on account of its general interest and not of its relative financial 
importance. 

160. It is worth noting that in the proceedings on the Asylums 
Officers Superannuation Bill 1909 (see par. 167 l)elow) evidence was 
given by Mr. Byrne (now Sir William P. Byrne, K.C.V.O.) of the Home 
Office to the following effect : — 

" That schemes for superannuation guaranteed by the rates and 
public funds had a tendency to impose a progressively increasing an<l 
surprisingly large charge. The superannuation scheme in force in the 
Civil Service involved a charge equivalent, according to actuarial 
calculations, to between 12 J and 16 or even more per cent, of the 
amount of the actual salaries, and it has l)een estimated that the 
Police Superannuation Scheme, sanctioned by Parliament in 1890, 
would involve an ultimate charge varying from '20 to 33 per cent. 
. . . . The Civil Service pensions are estimated to be equivalent 
to, say, 16 or 18 per cent, of the salary. The police pensions are 
estimated to be equivalent to from 15 per cent, in the lower ranks to 
33 per cent, in the higher. These amounts have been determined by 
actuarial calcuUition, and they are accepted as correct and are 



5« SURVEY OF VARIOUS METHODS OF PROVIDINO PENSIONS. 

habitually claimed in respect of police whose services are lent for 

various purposes The deductions that we make from the 

pay of the police amount only to ■> per cent, in the case of the younger 
men, and -ij per cent, in that of the older men, but the extra 
favourable terms given to the police have led to very serious conse- 
quences indeed, conspicuously in London but the same all over the 
country, namely that the deficit in the income of the Pension Fund 
has gone up since the grant of these very special pensions to the 

police, to nearly £250,000 a year in London alone I 

should like to mention some of the ways in which this huge pension 
deficit may l» built up by giving special privileges in the matter of 
pensions. The lowering of the age at which pensions may be 
grante.1 tells in two ways. Li the first place, it makes more 
pensioners, because the service is on the whole shorter, but also tends 
in a most astonishing degree to make longer life pensioners. Men 
who retire at 44, as they do in the police, will l,e pensioners for a venr 
long time. In the Metropolitan Police, it has addetl not merely two 
or three years to the pensionable life, but several years in addition 
owing to the better health and strength which the man possessed 
when he retired at the early age." 

Poor Law Officers. 

161. The Poor Law Officei-s Superannuation Act 1806, which 
applies to "every officer and servant in the employment of the guanlians 
of a union or parish," as well as to those in district schools and 
sick asylums and of the Metropolitan Asylums Boaixl, is not quite so 
complicated as the Police scheme that we have just been considering 
Pensions are claimable (a) on incapacity through infirmity at any age. or 
through old age after 60, (b) on 40 yeara service after age 60, or (c) after 
age 6o. After 65 the guardians can require resignation. The pension 
benefit commences after 10 years service, and is one-sixtieth of the salary 
(m the case of this Act the siilary is the average for the last five years) 
for each year of service up to the usual maximum of forty-sixtieths The 
rate of contribution is 2 per cent, in the case of officers with less than 
five yeai^ service and of all subsequent appointments ; with higher rates 
of 2^ per cent, and 3 per cent, for those of greater terms of service 
already appo.i^d. There are pi-ovisions for aggregating the service of 
officers with diflerent authorities, for adding ye^,^ of service in certain 
cases, and paying gratuities in others. The Act also contemplates the 
repayment of an officer's own contributions where he ceases to hold his 
office, mt, rather curiously, "voluntary resignation" is coupled with 
misconduct as an actual disquahfication for this purpose. 

.r.1^'^ '^''* !*"*»'=«"''»'« Act is simple. All pensions and gratuities 
are to be paid out of the "common fund" of the union and 2 
contHbutions are to be "carried to and fo«„ part of the common fund " 
We therefore arrive at the result that in the early year« of a scheme of 
this type, when there are only a few officens receiving pensions, the cost 



l>bOB LAW OFFICERS : ASYLUMS OFFICERS. 



57 



of poor relief would l>e reduced actually by reason of the pension 
€ontributions being credited to the common fund instead of being reserveil 
towards the ultimate liability. Unfortunately such relief is necessarily 
temporary and illusive, for all such sums must obviously be repaid with 
great additions when the pensions emerge later on. We understand that 
in the later part of the period that has elapsed since 1H9H, the exjjenditure 
under this Act has already risen to a higher level than the contributions 
in nearly all the Poor Law Unions ; so that they are now enteiing on the 
long period during which the debt of the past has to be discharged with 
compound interest.* 

163. It is of interest to note that by an amending Act, passed in 
1897, female nurses are specially exempted from compulsion to contribute 
under the scheme, and those already compulsorily included in it were 
to \ye allowed to conti-act out of it. This suggests that the Union 
authorities found difficulty in applying a general pension scheme to a 
class whose ordinary service is evanescent and fleeting. 



Asylums Officers. 

164. The Asylums Officers Superannuation Act 1909 is a little 
more complicated than the Poor Law Officers Act, owing to the 
necessity for dividing the officers into two classes, according as to whether 
they were in charge of the insane or merely engaged in administrative and 
ordinary work. But in general structure it is very similar. In both 
classes a pension can be claimed after 20 years service, or, in case of 
permanent incapacity, after 10 years. The age at which it is claimable 
is 55 in the first class and 60 in the second : the rate of pension \)e\ng one- 
fiftieth of the salary and emoluments for each year of service in the former 
case and one-sixtieth in the latter. The salary and emoluments are 
reckoned on the average of the preceding 10 years. 



165. The contributions are the same as in the Poor Law sclieme : 
viz., 2 per cent, for less than five years service, ranging up to 2J and 
3 per cent, for the men of longer standing. The 2 per cent, rate 
applies to all new entrants, whatever may be their agq^, and it is obvious 
that a rate of con tribution,^which would be very inadeciuate in any case to 
provide any significant proportion of the benefit, must be still more so in 
the case of a body of persons frequently recruited by entrants approaching 
middle age who will be entitled to pensions after 20 years or sometimes 
even after 10 years of service. In this Act, also, there is the pi*ovision 
that the return of contributions on loss of office does not apply to the case 
of voluntary resignation. 

* It is this feature of some public schemes that makes it difficult to classify them. The 
contributions of the beneficiaries suggest that they should be regarded as providing pensions 
" partly in advance " ; but the advance provision does not exist as a positive asset during 
the working period. It is not only absent ; it is, in fact, a negative quantity, masking 
the real extent of the average drain upon current revenue. On the other hand, some 
schools of thought might regard a State obligation as a proper substitute for an investment 
of capital. 



58 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



METROPOLITAN BOROUGH SCHEMES. 



59 



m. 



n I ' 



fi 



il 



formlrt ofU Tff V^' contributions a,* to be carried to and 

tZ T^ , k"1 "" """"'' ""' P^»^'°"^ ""^ ^ ** P«W- That is the 
tnnd out of which salanes, wages an.l expenses of maintenance are paid. 

Sir WM- ^B*""" f'"^^ '*'""*''^ <*"* P"-" 1««) '»>« evidence given by 
^ntTt.""" V n ""f"" ""^ '^'""'''*^' "" *"'« »"'• Amon£ other 
n deln ? : ''""" "" ""*"*"" °f ''■^ Committee were that 

n the Te of , '^"'"^ '° "'"■■" ^"^ "•«^'^' "^ contributions 

Hoi ^ ! ""^'"r '*«'g"««o„s, and that in the opinion of the 

JfoZ Offi , r' ^' ''°* '° "• *'«'•"'' »* pensionable." The 
I!r V !^ ° *'"'"^''* *'^'' '" ''" ''"hemes promoted by local 
authont,e.s, the contributions .should be fixed under actuarial advii sHs 

selves, and that the general position of the pension fund should be 

o"e7L''.bT"f '"r*"^ ""•^^^ ^"^ «dvieVof expert actSli 
order that the local authority might clearly see where their prepJsal 
after .t had been sanctioned by Pariiament. was leading them. 

The Principle of Continuous Service. 

connection 11'/''""'"' ^'"^ ''^'""' '^ "''""^"y »' ?«»» 'nt^-^^t in" 
connection with our present enquiry. l,ecause of the close analogy between 

their service and that of the Hospital officers, and because the s^L^e 

is:" tl '" "f T ^'^ "'•^■»^«' «-«"'-*- '"e S^^ 
TrS r ° """"'" °' "-Sg-^g^Won "-,-..., that all continuous 

periods of service in a particular profession should be regarded as 
pe„.sio„able at the end of the career. This, of coui^. is the pri^ip^ 
which the Hospital officers are anxious to establish in their owi! re "^ 

Financial Provisions of these and other State Schemes. 

169. The principle adopted in all these State schemes, of leaving the 
difficulty, or rather mconven.ence, in pmctice, viz., that in cases where an 
aiTthorit; it? "' ''^ """^ °' '"'• '"'^^^ "'"'- ™- '"an o" 

enquiiy to take place as to the proportions of the pension for which each 
employer is liable. Quite apart from questions of financial princ^e 
.t seems clear that this part of these .schemes would ..e simpliS S 
ontnbutions were to Ih, paid at the time when the service is rendeii 
On the other hand, if this ideal of financial purity were T S 

apply to the State, ,t does not come within the scope of our ennuii-y 
to pursue this matter. As regards all existing SUte fusions, inclS 

itti" TfTe"""""* : "T P*^""""'- ''''' '^'" •- «t^g-hek after the 
bfetime of the recipients. As regains future pensions, if the Government 
were rigorously to set aside, and to invest in State loans, the pro^ 



•■HMMiM 



annual provision for them, the effect would be that in coui-se of time a 
considerable proportion of the National Debt would be held by the State 
against its own pension liabilities. As compared with the position 
existing to-day, it would in fact have created an additional Sinking Fund. 

170. We proceed to the considemtion of some schemes where the 
employers do not postpone entirely their liabilities to the futui-e. 

Metropolitan Borough Schemes. 

171. In 1860 the Metropolitan Superannuation Allowances Act 
(29 Vict. ch. 31 ) gave power to the old Vestries, since replaced by the present 
Metropolitan Borough Councils, to grant pensions to their employees. 
The powers (permissive) extended to the old Metropolitan Board of 
Works, and the words are " to gi-ant to any officer who shall become 
incapable of discharging the duties of his office with efficiency by reiison 
of permanent infirmity of mind or l)ody, or of old age, upon his resigning 
or otherwise ceasing to hold his office, an annual allowance not exceeding 
two-thirds of his then salary, regard being had to the scale of allowances 
hereinafter contained." The minimum age was to be 60, and the sctile of 
allowances specified is virtually the old Civil Service scale. It is 
interesting to note in passing that no similar powers seem to have been 
conferred up to the prosent time upon the provincial councils, although 
many of them, of course, have obtained special Acts enabling them to 
grant superannuation. 

172. In recent years there has been a considerable movement* 
amongst the Metropolitan Boroughs towards the establishment of pension 
funds upon a contributory basis, with the result that many special Acts of 
Parliament have been obtained in this behalf, commencing with Stepney 
in 1905. Subsecjuent Acts were obtained by Bethnal Green, Kensington, 
Camberwell, Hackney, Deptford, St. Marylebone, Wandsworth, West- 
minster, Paddington, Poplar, and possibly others. 

173. Some points of considerable interest arise in connection with 
these Acts, but their general construction need not detain us. In this 
respect they are all very similar, and follow the general lines of the 
Poor Law Officers scheme; that is, the contributions vary from 2 to 
3 percent, of the salaries, and the benefits follow the old Civil Service scale. 
There is, however, in some of the schemes a second category of servants, 
who are usually defined as "workmen," earning less than forty-five 
shillings weekly. In their case the rate of contribution seems to work 
out at rather less than 2 per cent, of the weekly wages, while the pension 
scale is more generous than that of the officers, being Ijased x>n '* fifty- 
fifths " for each year of service instead of sixtieths. In the event of death 
or resignation, from one half to the whole of the contributions (the schemes 

♦ We are quoting here largely from a valuable paper on the subject by Messrs. H. W. 
Manly, F.I.A., and T. G. Ackland, F.I. A., pubUshed in the " Journal of the Institute of 
Actuaries " (Vol. XLVI, p. 327). 



eo 



SURVEY OK VARIOUS METH01.S OF PROVIDIN,; PKNH.ONS. 



If 




t^Sl'^^X'Tn'H ■'"'"' T.°'"'^ ^^"P«~Ho„ Fund, and to 
puLlic authorit e Ir f. I ^'""*' """'^ ^'"^' '*'-^''* ^^''h "'^^<- 

the s„pe«- 7S;. ' :tr"nV"'i '^"""^'' '"'• p"'*-- »♦• 

it, tba such a pmvWon in T"""*"' "'°"«*' "" '"'^«' "«' ^^^fied 

liability on the «^;", IT t"' ""'''^ "«>* -.^te an obligatory 
cost of the pension '^.l":'"'"'- ""'h"""- to contribute towa^t thT 

into the sZ ZuaHo r T""""' '" '""'^ "^ ^''« ^«'« ^^ W-b' 

authoritie.ira:r„r:fU':'j -""' ^-^ --^^^ '--^^- 

v« JtLt whth*''irt!!'"%"'f'^'"' adnnnistrntion and actuarial 
purpose. Inthecaro;t e::ri^:t^^^^^^^ '"' ""^ P"^-^ 

Fund, in addition to the conlS^^u ion,^f I "'''"?^ '"" '" ^^ '■"" "•« 
per annum as its contriZon r '"""'^'^' ""' ^""^ "' *'"« 

were to be insufficient f„i.??i • u'" ""^ ^^^ **'^ "«""' "^ 'no"""" 
be dmwn uZlTln T " ''""^" ""* ■■"'«■"*' °» '^e fund could 

:rrtEf~^^^^ 
.^^tjrtiratea— -:s;ti 

impomnt atttli:' IIV' T"^" ^"^ "■« Legislatu^madean 

a '^ri-r;a„7rconSurn'^ rht"'-"" "' '''^"'"'' '"^'^'^ 
l>eing further urovid JihT, " ""n"""™ «' «300 or £400, it 

five years bva„!I? "l" ?'"*"°» "'"'''« *'«"'' «l>""ld be made ev^nr 
and Sy XThS' ll tb """ "'"" *" '" '•"' --'--y "f '"e fun^ 
bution for the next oin ?""'""*. "' "" ^'■'' P"""""^ ""»"»' '»»tri- 

The intent 1 ^s ^371 '"'rl'" °1" '° '^^^ '"« '""'^ -'-"*• 
left it doubtful whether tL T ""'^»'^""»*«'y '^e words of the section 
would make thrfunH \ T"""^ ""^ "^ '""'" «'«=»" » contribution a« 

the authoS who Ive b^"\!" ',T '' ''"'' '" '"^ "^""' -»« "^ 
are laying up forthemll , "^^ ^' '°""'*' '" ""e latter sense 

the /adL^'oraid Polr '« r' '"'"t '"""'y- ^' '^'^ -' ""'" 
;3e satisfaUtnclSfLf idT:n'^t^ ST' ^•"" * 

ttiaJTis::^^:::/ ^^^ -- "-n^-rthe"d=:: 

made on t e Ke„lTo„ F." T""^ ""' '"^ ''''""''' ^""^'t- ""^ 
total cha.^.e on tleFld foTt "' "''"""'^ ""*' ^""^ "'«'»«'« 
per annu^, and that if thi r r^'f "°"" '" «'^"' *»'«"« 
minimum sum of £3,m n -^ ^?"""' P*'** '"'" ">« •''""'» ""ly the 
an annualderenfvTf £7^, '1'' '""'■ ^'''' "'^'^ ^-•" "'''"'A be 
mte : also thatTfTglt Cj' "'"""^' "" *" '"^' °"* "^ "^ ^"''-' 
a..".ml sum of al«ut £3 52 .'""iTT' "'*' '" '^ "'"^^^ "" «''"««-«d 
pmsent time ThrSelectT " '* P*''' '"'" ""^ ^""'I f""" the 
the wording of which "1 ^^T^ r?"''"^'-^ «-«"ded, in a manner 
section preiriL! "1 T Tt ' '' *''*' ^"*'*''"^ "^ Actuaries, the 
prescnUng an actuanal valuation which had been inserted i,^ the 



xMETUOPOLlTAN BOROUGH SCHEMES. 



61 



earlier Acts ; and now it is provided in these later Acts that the actuary 
shall report, not what "amount" but what "percentage of the total 
salaries " shall be paid into the Fund by the Council, and it shall be so 
calculated that " without further recourse to the genei-al rates " the Fund 
shall be solvent having regard to all its existing and prospective liabilities. 

176. If the matter had been left thei'e the position would have been 
fairly clear, and the employer would have been making his contributions 
towai-ds his accruing liabilities in what would seem, prima fade, to be the 
best possible way, viz., by a percentage of the salary paid as and when he 
profited by the services of the officer ; for this would no doubt l>e the 
effect of the clause as regards all new officers, though it may possibly 
have Ijeen intended to leave some discretion to spread the cost of 
existing pensioners and existing staff over a longer period. The Select 
Committee, however (and we refer to the question here l^ecause it raises 
a point of much general interest which we shall encounter in connection 
with the London County Council and N«w Zealand Funds), pi*ocee<leil to 
insert in the clause, at the suggestion of the auditor of the Local 
Government Board, additional words to the effect that the actu{iry*s 
certificate was to 1^ such as would " cast upon the mtes as nearly as may 
be an even annual charge so long as this Act is in operation in i-espeet 
of the expenditure both under this Act and under the Superannuation 
(Metiopolis) Act 1866." In a well established fund which had attained a 
stationary position this special provision would not perhaps make much 
difference; but these Borough Funds have to meet heavy liabilities 
to pensioners in the near future, inherited from the earlier pension 
legislation, for which they are receiving very insufficient contributions, so 
that the Borough's contributions would in a normal way attain a maxinuuii, 
and then decrease when those pensioners die and are succeeded by men 
who have contributed for their pensions throughout their whole cai-eer. 
Therefore an even charge, which according to the strict terms of the Act 
must be a perpetual charge, is quite unsuitable to the circumstances. 
On the other hand it might be argued that it is unsuitiible to place the 
whole burden of providing for existing pensioners and existing staffs cm 
the remaining period during which the latter will be earning salaries ; and 
it would seem to be for this rea.son that the Local Govei-nment IVwii-d 
suggested an equalized charge.* 

177. The short history of these schemes which we have given shows 
that it is only by slow degrees, even in such i-ecent legislati<.>n as this, 
that sound principles have come to be recognized. There seems to be 
no legislative machinery designed to co-onlinate the principles on which 
sanction should be given to stiite and municipal pension schemes. In the 
course of our review we shall find further that pension matters have l)een 

* A speech made by Mr. Careon Roberts of the Local Government Board at the 
Institute of Actuaries when the paper of Messrs. Manly and Ackland was read was of 
such general interest in regard to this part of our subject that we quote part of it in 
Appendix VII. It will be seen that so far as Mr. Carson Roberts represents the Local 
Government Board view perfection would be reached if all present public liabilities 
were to be discharged within 60 years. But this, of course, would not be the same 
thing as providing for the pensions in advance. 



'r> 



«2 



St RVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



M 



III 



i 



dealt with mlministrntively in various and quite independent wavs by the 
irade and the Board of Education The new Ministry of Pensions haa 
war pensions , but the existence of such a Ministry and of a Government 

tTZ^:.Zl'V''^^'''''''"' P-u„.ably be avaiirt 
w^l peihaps lead m t.me to greater attention being paid to pension 
problems generally. Among these none seems moi* impoLnt thrZ 

sroTh-e"";' "'T""^ ''' ""^•^-■^ financial'prso tr the 
cost of the existing staffs should te authoritatively laid down Much 

SrjhL ! T^'^T- '? "- »-" occasioned'by the endeavolt 
include this cost, and even that for existing pensioner,, as well as a 
P-per provLsion in advance for all newly apV>inted Officers „ IJ 
"."fo.™ pei-centage. or one "e.,ual chaise" For the pur^l of Z 

exKsting staffs, particularly such part of it as is occasioned by their uast 

;ri:ntttue^r ' " --'^^"^ - ''• ^ --«'-' - « 4.^:: ^d' 

178. Me8.srs. Manly and Ackland, in the paper from which we are 
quoting, p.„ceeded to make some calculations 71 the ix.,1 ZtZ Z 
•«nefats conferred by the Acts. Disi^garding for the time TLg the 

existing staff, and taking only the case of the future entmnts wHering at 
a uniform rate of contribution, they assumed a uniform ivvte of "K 

Tie o t' 7T """ """"^ '"'^ '^ ^' •*"'• f^™ --"""en. 'Z 
suile of benefits (... par. 173) was for pensions at 60 of "sixtieths » after 

ti?/ ^T'' ^•""' °" '•"* "**"'«« "^^^y »f the h«t five years in 
he case of officers, and of amounts almost exactly equal to "fiftieths- k 
the case of workmen. On withdmwal or death, I was assumed Z 
member's contributions would I,e ^turned without i„te«>st. An av Jge 
salary scale was deduced from the experience of some of the BorluZ 
which commenced with £67 at age 20 and gi^ually incited to £25^ at 
age 60 and other assumptions were made by the author based on their 
knowledge of other funds. In the result they found that the toto 

ri rth^f'"' ' itT' '""'" -" " ^"^^^ - 1"" ^^^ 

to pay for the aforesaid benefits, was 81 per cent, for officen,. who wer^ 
assumed to ent.r at 20, and 5 84 per cent, for workmen entering at 2" 
Deducting the percentage payable by the members, the employer must 
provide the balance of alK>„t 5 6 per cent, on all salaries paid Jofflcei 
and about 4-34 per cent, of the wages paid to workmen. 

179. It is easy to calculate from these insults the approximate cost 
to an employer of a scheme to provide in advance pensions on the 
foregoing assumptions ; though they would prol«bly undei^tate the cost in 

«ere higher. Mr. Leveaux, F.I.A.. estimated in the case of the Civil 

Service (,.. par. 146) that in the lower division the pensions «,p,^sen^ 

n present value a higher pen^entage of the salary thaVin the caJe 7T. 

higher paid and more rapidly promoted men in the higher division But 



COST OF METROPOLITAN BOROUGH SCHEMES. 



his estimates were based on individual calculations with the help 
of standard mortality tables, and do not appear to be confirmed by 
the Report of Lord Southwark's Committee on the l^ilway Funds 
(itee par. 225), nor by the calculations of Mr. P. L. Newman, F.I. A. (itee 
par. 54). 

180. It will be understood that the foregoing results— some of 
the most exact and authoritative that have hitherto l>een arrived at — 
contemplate the proper building up of a pension fund from the outset. 
Co'.itinuing their calculations to throw light on the cost to the local rates of 
working out the .schemes on the " assessment " principle sanctioned for the 
earlier Acts, Messrs. Manly and Ackland found (we will take fii-st the ca.se 
of the officers) that if the benefits wei-e payable out of the meml)ers* 
contributions only, the accumulated fund would be exhausted at the end 
of 53 years ; and that from that time onwards the contributions would 
have to be supplemented by the rates, with the result that the charge 
would ultimately attain a maximum and stationary jjercentage of 19067 
of the total salaries, the total cost being thus, with the memljers* 
contribution, 21 567 per cent, of the salaries. It will be rememl>eretl that 
all these calculations suppose a stati(mary staff and not one that is always 
numerically increasing as is more usual in practice. In other words, we 
understand the figures to mean that an employer granting salaries on 
the stated scale, who might provide in advance for pension liabilities by 
contributing 5*6 {ler cent, of his salary list, will ultimately have to pay 
about 19 per cent, of that same list by postponing the question and paying 
in ari'ear. Before arriving at that stage, he will have exhausted all past 
contributions, even those of members still working. In the case of the 
workmen, the fund resulting from their own contributions would be used 
up in 45 years and the increasing subsequent charge on the rates would 
reach a permanent maximum of 14*349 per cent, of the wages, the total 
cost, with the members' 1*5 per cent., being thus 15849 percent. If, 
however, the employer had scrupulously invested the meml^rs' contributions 
until the proper time, his own contribution in arrear would attain a 
maximum of about 15 per cent, for the officers, and about 12 per cent, for 
the workmen. 

181. The actuaries (]uoted also proceeded to make further estimates 
of the cost, to the employer, of the existing staff*. In this respect the 
fac:ts in regard to each Borough would no doubt differ considerably ; but 
it was necessary to make some general or average estimate of the 
numbers and ages of the existing stiiff as a basis for the further 
calculations. For purposes of the calculations mentioned in paragraph 1 78, 
it had been necessary to construct certain tables showing the probable 
rates of reciniitment and retirement in such a fund ; and these figures 
were now used to estimate the condition of the existing staff of a 
stationary fund at a particular moment of time. It should he added that 
the method of calculation made it necessary to include the future cost of 
pensions already granted. It was also assumed that the rate of 
contribution for the existing members was 2 J per cent, for the youngest 
class, 3 per cent, for those from 5 to 15 years' service, and 3|^ per cent. 



64 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



LONDON COUNTY COUNCIL SUPERANNUATION SYSTEM. 



65 



n 



fi 



i 



i\ 



for those over 15 years. In this way the conclusion was reached that, 
including pi-ovision for existing pensions, a total charge of 19154 percent 
of the salaries was necessary to be provided in advance for the average 
term of the existing officers' future service, or, deducting the average 
percentage of the staff, 161 18 per cent, to be provided by the employer. 
In the case of the workmen the corresponding percentages are 17008 and 
15-508. Of course as old officers retired and new ones took their places 
at the reduced rate of 5-607 per cent, previously found to be necessary, 
the charge would gradually fall to the latter figure as a minimum. All 
these calculations are l^ed upon certain date which might not apply to 
other services. 

London County Council Superannuation System. 

182. The London County Council on its formation in 1889 passed a 
resolution that no pensions would l>e paid in the case of newly appointed 
officers; and instructed its Stending Committee to report on an 
*' Insurance Scheme." The latter body favoured a provident fund of the 
type adopted by the Manchester Corporation. This was really a savings 
biink, into which the employees paid 3} per cent, of their emoluments, 
the Corporation adding 1^ per cent., making a 5 per cent, contribution in 
all. In 1895 the Council initiated such a Provident Fund, the employee's 
contribution being limited to 2^ per cent, of the salary. The Council 
contributed an equivalent amount and guaranteed 3 per cent, interest 
on the accumulations. The pensions provided by this plan were in many 
cases small, and the Council was in time forced to develop the Fund into 
a complete pension scheme. 

183. The London County Council Supemnnuation and Provident 
Fund Scheme, dating from 1907, applied to all future employees 
of the Council and to such contributors to the earlier Fund as elected to 
join. It excluded certain sections of officers who were provided for by 
special Acts, and also the contributors to the London School Board 
(Officers) Fund, but the latter was amalgamated with the Council's Fund 
in 1909, though in effect in 1911. 

184. The pension benefit is reckoned at one-sixtieth part of the 
average salary throughout the period of contribution, including the period 
of contribution to the eai-lier Fund mentioned above, and it is claimable, 
subject to a minimum of 10 years .service, after age 60 with 40 years 
service, or after 65 unconditionally, or earlier in the event of incapacity, 
with a minimum of 20-sixtieths in the event of breakdown before age 65 
a!id a maximum of 40-sixtieths. There are also provisions regulating the 
return of contributions, with or without interest, in the event of death 
either before or soon after the grant of the pension, or of withdrawal from 
the service. 

185. The officer contributes a percentage of his pay varying with 
his age at entry. According to the original scheme the rate was to be 
3 per cent, under age 25, 3J per cent, from 25 to 35, 4 per cent, from 
35 to 40, and 5 per cent, over 40. The weekly wage class were to 



contribute Id. for every 2s. 6d. of wages. The Council on its part under- 
took to pay 3 per cent, of the salary and emoluments, and in the case of 
the weekly steff a contribution equivalent to that of the meml^er, also to 
guarantee 3J percent, interest on all funds, to bear the expense of manage- 
ment, and finally to guarantee the solvency of the Fund genemlly. 

186. In order to provide for this last liability it was further 
arranged that the Council should " pay or otherwise make good to the 
" Fund the sum of £62,500, being the estimated amount required to make 
" the Fund solvent having regard to the existing and prospective assets 
** and liabilities of the Fund " at its commencement. This initial 
deficit was due to the insufficiency of the contributions to the earlier 
Fund before 1907 to provide pensions on the new .scale in respect of 
service before 1907. It is understood that the scheme as a whole was 
settled in consultation with the late Mr. H. W. Manly, F.I. A. 

187. An actuarial valuation was made in 1913, when the funds 
amounted to £844,560, with the result that a deficiency was exhibited of 
no less than £471,448. To the extent of about £70,000 it was estimate*! 
that the deficiency was caused by slight variations in the scheme made by 
the Council itself in the way of concessions. For the rest the deficiency is 
mainly attributed to the improved rate of mortelity in the community 
generally, and in particular to the superior vitelity of the Council's 
pensioners. So heavy a deficiency, arising so soon after the initiation of a 
scheme under actuarial advice, affords a forcible illustration of the fluctua- 
tions to which a fund of this type is subject. The liability for the deficit, 
being the sum estimated to be necessary to make the Fimd solvent as regarded 
existing members, was assumed by the Council under its general guarantee. 

188. As regards all officers to be appointed in future the Council 
decided not to increase its contribution of 3 per cent., and that the contri- 
butions of future meml>ers must be increased to prevent the i-ecurrence of 
any similar deficiency. On actuarial advice it was accordingly decided to 
deduct from the salaries in their case the following increased scale of 
contributions, beside which the original scale is given for comparison : 



• 


Salaried Staff. 


1 — ■ 

Wages Staff. 


Age at Entry. 


New Bate. 


Old Rate. 


1 

New Bate. 










Old Bate. 




Men. 

1 


Women. 








Under 25 


5 per cent. 


3 per cent. 


3 per cent. 


Id. in 2s. 6d 


Id. in 28. 6d. 


. 25-30 


6i M 


5 ., 


H .. 


IJd. „ 


Do. 


30-35 


7 „ 


7 „ 


H .. 


lid. „ 


Do. 


35-40 


8i M 


8f ,. 


4 „ 


2d. 


Do. 


40-45 


9i .. 


lOi „ 


5 „ 


2d. 


Do. 


45-50 


10 „ 


Hi ,. 


5 » 


2d. 


Do. 


60-55 

1 


10} „ 

1 


12 „ 


5 „ 


3d. 


Do. 



E 



66 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS 



LONDON COUNTY COUNCIL SUPERANNUATION SYSTEM. 



67 



189. It will be instractive to add to these rates the Council 
contributions, and thus show what, accoi-ding to one of the latest 
actuarial enquiries, is the total cost, measured as a percentage of the 
salary, of such benefits as are provided by this Fund : — 



Age at Entry. 


Salaried Staff. 


Wages staff. 


Men. j Women. 


Amount. 


Per cent. 


Under 25 


8 per cent. 


6 per cent. 


2d. in 2s. 6d. 


6-66 


25-30 


n ,. 


8 


2jd. „ 


8-33 


30-35 


10 


10 


2Jd. „ 


8-33 


35-40 


n\ M 


Hi .. 


3d. 


1000 


40-45 


m ,. 


m .. 


3d. 


1000 


45-50 


13 


l^ ,. 


3d. 


1000 " 


50-55 


13f ,. 


15 


4d. 


13*33 



190. In addition to the actuarial deficiency shown on the valuation 
of the Superannuation Fund, the Council found itself with other pension 
liabilities. When the School Board was taken over there was a liability 
to supplement the pensions payable out of their Officers Fund. Some 
officers were brought (1909) into the Council's Superannuation Fund at 
the cost of an " initial deficiency " the outstanding balance of which in 
1914 was £65,829 ; and the obligation to supplement pensions caused a 
liability now valued at £153,378, the total deficiency for old School 
Board officers being thus £219,207. There was a further liability for 
pensions, payable in arrear on Civil Service principles, in respect of 
208 pensioners and 256 officials taken over from the old Metropolitan 
Board of Works, which was now (1914) valued at £395,000. 
The total liability to be dealt with was thus as follows:— 

Superannuation Fund deficiency £471,448, with £ 
interest to 1914 

Balance of initial deficiency of £62,500 ... 

London School Board liabilities 

Metropolitan Boai-d of Works liabilities ... 



506,950 

60,241 

219,207 

395,000 



£1,181,398 



The Council decided to consolidate these liabilities, and to make 
provision for discharging them by means of an equal annual payment 
of £50,500 per annum, the estimated period within which it would do so 
being 50 years. 

191. Our discussion of the Metropolitan Borougli Pension Schemes 
(see par. 176) shows that many of the foregoing liabilities will involve 
maximum payments, and, indeetl, be finally extinguished, long before the 
expiration of the 50 years over which the cost is to l)e spread. Even as 
regards the youngest members of the staff", their pensions will probably all 
have iH?en entere«l uixjn l>efore the expiration of the 50 yejirs. It is, 



therefore, clear that, excellent as is the security for the pensions, the 
Council's method of dealing with the deficiency will not provide the 
pensions entirely in advance, even so far as regards the present staff, 
though future entrants will be provided for in advance unless a future 
deficiency occur and be similarly liquidated by deferred payments. 

192. In addition to providing for its officers, the Council initiated 
in 1911 a scheme for admitting to the Superannuation Fund the teachers 
in the Council's schools. This provides for similar benefits, and in the case 
of all elementary or other teachers entitled to statutoiy pensions is so 
arranged as to mise the latter to the level of the Council's benefits. 
Though the benefits of the two schemes are thus correlated, the accounts 
of the Teachers Fund are kept quite distinct from those of the officei-s. 
The number of teachers contributing was 17,004 in 1913 and 17,857 in 
1914, by which date the corpus of the Fund had already amounted to 
£1,160,909. Of this sum £262,478 " was the amount outstanding of the 
" initial deficiencies for which the Council is liable." No actuarial valuation 
of this Fund has yet been made; but as the rates of contribution 
correspond closely with the revised rates of contribution to the Officers 
Fund, there is no reiison to anticipate any such deficiency as existed in 
the case of the latter, and was seen to be due to the insufficiency of the 
original rates of contribution. 

193. The system of consolidating various capital liabilities, which 
are essentially different in kind, and liquidating them by a combined sinking 
fund, is seen to possess one important di-awback, viz., that it is has no 
relation to the actual liabilities foiling in particular years. The Council 
is firmly endeavouring, however, to make provision in advance for all 
pensions in respect of future service concurrently with the liquidation of 
those existing lialnlities which are mainly in respect of past service. It 
is, in fact, voluntarily passing from the system of providing in arrear to 
that of providing in advance, and apparently elects to regard the cost of 
doing this as a capital charge which may be spread properly over any 
convenient period. For charitable or other institutions who are not in a 
position to set up a fully secured charge of that kind the sound principle, 
already suggested in paragraph 177, would seem to be to present in every 
case separate accounts, and to make se^mrate provision, for (i) existing 
pensions; (ii) future pensions for the past service of an existing staff*: 
and (iii) future pensions for future service. The.se three div'isions are 
essentially different in character, and the periods, whether working lifetime 
or otherwise, within which financial provision should be made for them, 
are also different. It will be useful in considering the case of the 
Hospital existing staffs to bear these distinctions in mind. 

New Zealand Government Superannuation Funds. 

1 94. It will be instructive to take the case of the State Superannuation 
Funds of New Zealand, the Government of which, like some others of the 
Overseas Dominions, has made a praiseworthy attempt to measure 

K 2 



68 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



NEW ZEALAND Gt>VERNMENT SUPERANNUATION FUNDS. 



69 



r ! 



ill 



I' 



1 
1 



and provide for the pension liabilities of the future. The Funds 
were instituted, (i) for the Rjiil way Service in 1903, (ii) for Teachers, 
including those in Univei-sities and all branches of the public education 
service, in 1906, and (iii) for all other permanent public servants in 1908. 
The pensions follow our own Civil Service (1859) scale in being calculated 
at one-sixtieth for each year of service, with a maximum of forty-sixtieths. 
In the case of the Kailway Fund they are based generally on the final 
salary, and are claimable at 60 or after 40 years service. In the other 
Funds, however, they are based on the avei-age salary of the last three 
years, and are claimable at 65 or after 40 years service (females at 55 or 
after 30 years service). There are also provisions for pensions on a similar 
scale in case of disablement, for death benefits in the shape of a return of 
contributions if unmarried or pensions for widows and children where they 
exist ; also for return of contributions on withdrawal, etc. 

The scale of contributions under all the schemes is as 



195. 

follows :- 



Age on joining. 



»» 



» 



f» 



»f 



5 per cent, of pay. 
6 
7 
8 
9 
10 



t» 



ff 



M 



under 30 .. 

30 and under 35 .. 

35 „ 40 .. 

40 „ 45 .. 

45 „ 50 .. 

50 and over 

In the case of the Railway Fund, however, all contributors up to 50 who 
joined prior to 1908 paid 2 per cent, less than the foregoing rates. 

196. Though it was obvious that the enrolment of large numbers 
of existing officers must rapidly lead to very heavy pensions charges, the 
Government contented itself, at the initiation of the Railway Fund, with 
a provision that any deficiency should be met out of the Consolidated 
Fund. In 1908, however, the formation of the other Funds led to the 
financial provision being placed on a different footing, and since then the 
State has allotted to each Fund a certain annual subsidy. It was further 
provided that triennial actuarial valuations should be made. 

197. The result of the latest valuations (made as at 31st March, 
1912, 31st December, 1913, and 31st December, 1913, respectively) may 
be summarized as follows :— 



% 


Liabilities. 






Assets. 


• 


Fund. 


Value of 
Benefits. 

(2) 


Funds. 

(8) 


Contributions. 


Subsidy. 


Further Subsidy 
required. 


(1) 


Value. 

(4) 


Amount. 
(5) 


Value. 
(6) 


Amount. 
(7) 


Value. 
(8) 


Railways 

Teachen 

Public Service ... 


£ 
2,743,194 

2,202,272 

4,246,382 


£ 
233,457 

265,136 

537,914 


£ 
732,886 

493,539 

1,827,002 


£ 
25,000 

17,000 

48,000 


£ 
625,000 

425,000 

1,200,000 


£ 
46,074 

40,744 

47,259 


£ 

1,151,851 

1.018,597 
1,181,466 


Total 


9,191,848 


1,036,507 


2,553,427 


90,000 


2,250.000 


184,077 


8,851,914 



19H. It will l>e seen from columns 5 and 6 that the actuaries, in 
making up their Valuation IJalance Sheets, valued the Government 
subsidies at 25 years purchase, viz., as perpetuities valued at 4 f>er cent. 
Our discussion of the Metropolitan Borough Schemt^s and the London 
County Council system has shown differences of opinion as to the proper 
perio<l over which sul)ventions should be spread. It is clear, however, 
that they should not be rcgaixled as perpetuities, but as available, at the 
most, for no longer than the term of the existing generation. For the 
purpose of this Table we have followed the example of the valuing 
actuaries, and alongside column 8, which exhibits for each Fund the 
amount of deficiency, or present sum to be made good by future subsidies, 
we have placed in column 7 the fuither annual subsidy required, even on 
this basis of irreducible minimum, to make the Funds solvent a« regards 
the existing membership. 

199. The Acts had directed that the actuarial reports should show 
" the prolmble annual sums required by the Fund to provide the retiring 
" and other allowances falling due within the ensuing three 3'ears without 
" affecting or having recourse to the actuarial reserve appertaining to the 
" contributors* contributions." This was interpreted by the actuaries to 
mean that the pensions thus falling due should l>e divided into two parts, 
viz. : (i) that part of them provided by the contributions, and (ii) the 
remainder, being the portions earned by "back service" and also such 
parts of the pensions for years of contribution as the contributions were 
insufficient to provide ; and it was assumed that the second part, which 
could not properly be charged to the Funds, should be met by subsidy, to 
be increased from time to time as required. 

200. The results obtained were as follows, (a) being the estimated 
pensions payable, (b) the portion provided by the contributions, and 
(c) the balance, or subsidy required from the State : — 







1914. 






1915. 






1916. 




Piini) 






















(•) 


(b) 


(c) 


(») 


(b) 


(c) 


(a) 


(b) 


(c) 


Railway 


£ 
62,063 


£ 
13,901 


£ 

48,182 


£ 
; 64,525 


£ 
15,409 


£ 
49,116 


£ 
67,552 


£ 
17,164 


£ 
50.388 


Teachers 


83,309 


4,172 


29.187 


! 88,111 

1 


5,215 


32,896 


42,958 


6,358 


36,600 


Public Service 


66,664 


6,501 


60,163 


74,665 


8,379 


66,2S6 


83,058 


10,542 


72.516 


Total ..: 


162,056 


24,574 


137,482 


■ 177,301 

! 


29,003 


148,298 , 


193,568 


34,064 


159,504 



201. From this Table it appears that, on the principle defined by 
the Legislature, the State subsidy of £137,482 needed ihv 1914 was likely 
to increase annually at a i-ate of over £10,000 per annum, and probably 
for many years to come this must necessarily be so. The State has 
assumed the heavy liabilit}^ for all the past service of the .staff's who wei-e 
" existing " at the initiation of the Funds, and for the insufficiency of the 
rates of contribution to provide entirely the pensions for future service. 
Towards this liability it gives in advance the insufficient subsidy of 
£90,000, as shown in column 5 of the Valuations Table {aee par. 197). 
The balance of its liability is thus treated as pensions payable in ari-ear, 






tO 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



NEW ZEALAND GOVERNMENT SUPERANNUATION FUNDS. 



71 



I 



and tliat i>ortion must steadily iiicimse until the burden of the existing 
staffs gets gradually worked off'. 

202. For a true view of the existing position we must revert to 
the foregoing summary of the valuations, where it is seen that, after 
allowmg for the subsidies of £90,000 j)er annum already paid by the 
fetate, thei-e was a capital deficiency of £:],y51,914 ; and that it would 
need a perpetual charge of £1^4,077 to liquidate it, making a total State 
subsidy of $224,077 per annum. This comiKii-es with the £137,482 shown 
in the last Table to l>e provided for 1914 by the method actually adopted. 

203. If the more pi-oper method were adopted of liquidating the 
deficiency during the term of the existing generation, the above estimated 
subsidy of £224,077 would, of course, \ye further increiised ; and it would 
probably be greater still if the method suggested by the Institute of 
Actuaries {see par. 175) were acted upon. For by that plan the actuary 
would report what further percentage of the total salaries should l,e paid 
to make the Fund solvent ; and so far, at all events, as i-egards all 
pensions except those earned by past service, the subsidy would be 
entuely paid during the working lifetime of the officers, as and when 
their salaries wei-e being paid. 

204. It will now be interesting to see what light the reports throw 
on the cost of including the existing staffs in the schemes. Some 
approximation to this may be made by recourse to the Valuation Reports, 
where the different items of liability are valued separately. Of course 
what we are seeking is light on the cost of existing staffs at the 
initiation of a scheme, whereas these Funds had already, at the dat^s of 
valuation, been in existence for an average period of about 7J years, 
l^ensions ali-eady paid would be almost entii-ely for paM service, and these 
imynients would act in diminution of any present estimate of the cost. 
On the other hand, the initial deficiency in the Funds due to this cause 
has been mounting mpidly at interest. The latter force would outweigh 
the former, and would thus tend to exaggerate any estimate of original 
cost based on present figures. 

205. Disregai-ding some minor items, and taking the present value 
o the pensions ah-eady gmnted, amounting to £1,133,452, and the value of 
t le pi-ospective pensions for pa^t service, which are likewise separately 
stated, amounting to £3,738,557, we have a total chaise for existing 
stoffs of £4,872,009, or 53 per cent, of the total liability of £9,191,848 
shown m column 2 of the above Valuations Table. A very similar 
peix^entage is found to apply to each Fund taken sepamtely. If we 

TiH^l 'IT ^^"^ ^'"''^^'«>»J'' «""^ the whole of the accumulated funds of 
*'i,0Jb,o07,as representing the pa^t contributions, there remains a net 
denciency of £3,835,502, which appears to, be mainly attributable to 
I>ensions for jmst service. As the totiil meml,ership of the Funds at the 
date o valuaticm was 24,074, with annual salaries of £3,954,085, it would 
seem that, accoi-ding to the experience of the New Zealand Funds, a sum 
approaching one year's present salaries must now be provided for staffs 
existing at the outset or subsequently taken- on with insufficient 



contributions. Of course, nothing like definite conclusions could l»e 
drawn from such very general considerations, nor in any case from 
the experience of Funds working under conditions perhaps wholly 
ditt'ei-ent from those existing in London Hospitals. The ciilculations of 
Messrs. Manly & Ackland (see par. ISl), bfused on a somewhat similar scale 
of benefits, suggest that the foregoing estimate may l>e an understatement. 
They estimated the total cost for an existing staff, including existing 
IKjnsions, at about 19 per cent, of the salaries, gradually decreasing U> 
about 8 per cent., when the Fund should consist entirely of members who 
entered young. As we shall find later on (see par. 858) this proluibly 
represents a capital deficiency in excess of one and a half years salaries. 

206. It is thus seen that in the case of these Fmids, as in that of 
the Metropolitan Boroughs and the London County Council, the existence 
of deficiencies and the problem of liquidating them are closely connectetl 
with provision for the existing staffs. In view of the opinion we have 
expressed (see pars. 177 and 193) that the cost of ptist service and future 
service should l)e regarded as separate problems, it is interesting to see 
that the New Zealand actuaries have in their valuations sepiirately 
calculated the cost of all " back service." If the same principle could be 
acted upon at the initiation of a fund, and the estimated cost of past 
service be separately stated in every application for subsidy submitted to 
Parliament, much confusion of thought and argument as to the pi-oper 
periofl for liquidating it would be avoided, and the whole problem would 
be pi-esented in a clearer though possibly not an easier aspect. 

207. Another question upon which these Funds may throw some light 
is the extent of the early retirements from distiblement. The statistics of 
these cases are given in the following Table, showing the membership and 
early retirements for the combined Funds annually since they were started: — 







Coiubiuod Funds. 




Year. 


No. of 
Members. 


Retired 
Medically Unfit. 


Rate of Retirement 
ptr 1,000 Members. 


1903 


3,400 


5 


i-6 


1904 


6.417 


28 


4-4 


1905 


6.771 


15 


a-2 


1906 


9.910 


20 


2-0 


1907 


10.371 


20 


1-9 


1908 


18,299 


44 


S-4 


1909 


■ 19,122 


32 


1-6 


1910 


20.556 


25 


1-2 


1911 


21.556 


46 


21 


1912 


22,916 


43 


19 


1913 


14.826 


27 
305 


1-8 


Totals and average 


154.444 


20 

• 

1 



72 



SURVKY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



i 



t 



1 

I 






208 It IS thus seen that the average annual rote of retirement for 
the conibmed Funds and all ayes Ims been 2 per 1,000 of the membership ; 
"I'd hat, speaking generally, the insults of each year have not varied 
greatly froin that average. Taking the Funds sepamtely. the average 
rate for the whole period in the Kailway Fund was alwut 1-7 per 1,000, 
•n the Teachers Fund about 27, and in the Public Service Fund almost 
exactly 2 per 1,000. 

209 The valuing actimries calculated graduated rates for these 
early retirements at each age, and from their Tables we extract the 
toUowmg specimen rates :— 



NEW ZEALAND GOVERNMENT SUPERANNUATION FUNDS. 



73 











Age. 


Rate of Retirement 


per 1,000 Members (Combined Funds). 




Males. 


Females. 


26 


1-0 






30 


10 . 




^BM 


35 


20 




2-5 


40 


2-3 




50 


45 


2-8 




13-8 


50 


6-8 




690 


56 


20-7 




WHI^ 


60 

„_. 


581 








210. At the higher ages here quoted it is possible that some 
normal retirements are included. The chief conclusions to be drawn 
seem to be : (i) that at the middle ages the disablements among males do 
not greatly vary from the ave.«ge of 2 per 1,000, (ii) that they show, as 
one would expect a tendency to incite about 50. when the additional 
cost of providing for them is not so great as at eariier ages, and (iii) that 
the case of females calls for separate consideration and calculations. 

r„f ^V M ^'' t''° •"*'™*"'^« ^ ^i*'^ the disablement pensions as a 
TZl 1 *"/*' I^"««"'« ««^»'«'l. thus eliminating that element of the 
membership which disappears by death and withdrawal. How numerous 
the withdrawals were in the case of these Funds is seen in the following 
statistics of membei-ship from their initiation up to the dates of theS 



Fund. 


New 

MemWrs 

joining 


Discontinued. 


— 




Deaths. 


Withdrawals. 


• 

Service 
I'ensions. 


Disablement 
Pensions. 


Existing 
Members. 


Railways 

Teachers 

Public Service ... 


13,747 
5.432 

13,935 

1 


338 

81 

207 

626 


3,269 

947 

2,336 


760 
317 
480 


132 
70 

103 J 


9,248 

4,017 

10,809 


Total ... 

• 


33,114 i 


6.552 


1,657 


305 1 


24,074 












. I 





212. It will be understood from this Table that in a Fund where 
the withdrawals are so numerous, it may make a great difference in the 
ultimate cost of the pension per se whether members withdrawing are 
entitled to all contributions made by or on behalf of them, or whether, on 
the other hand, a pjirt or the whole of such contributions is left in the 
Fund to help the cost of the pensions. 

213. Taking the service and disablement pensions actually 
granted, some further ijarticulars are given in the reports, which 
may be summarized as follows : — 





Age of Fund 
(about). 


Service Pensions. ' Disablement Pensions. 


Fund. 


Granted. 


Void by 
Death. 


Granted. 


Void by Death 
or Expiry. 


Bailways 

Teachers 

Public Service 


10 years 
8 „ 
6 „ 


760 
317 

518t 


126 

33 
80 


132 

63 = 
1431 


52 
13 
42 


Total 


1,596 


239 


338 


107 



* In the previous Table this number is 70. The difference of 7 probably represents 
cases where a lump sum was paid. 

f These figures, which exceed those given in the last Table, appear to include some 
pensioners transferred from a Police Fund. 

214. It is seen tbat in all 1,933 pensions were granted, of which 
those given on disablement were 338, or 17 J per cent, of the whole. The 
disablement percentage in each Fund separately is 15 per cent, for the 
Kailways, 16 J per cent, for the Teachers, and 2 1. J per cent, for the Public 
Service (including Police). These ratios are very much smaller than the 
pi-opoilions found to exist in the Home Civil Service (see par. 147). 

215. A further point of much interest emerges from this Table, 
viz., the much higher mortality which occurred amongst the pensioners 
retired as medically unfit. Taking the totals of all the Funds, which had 
l)een in existence for an average period of 7 J or 8 years, it is seen that of 
the 1,595 ordinary pensions granted 239, or 15 per cent., had alrejidy 
lapsed l^ death. But in the case of the 338 disablement pensions 
granted the number already void by death was 107, or over 30 per cent,, 
notwithstanding the much lower average age of this class. 

(d) On an Absolute Scale or Flat Rate 

and 

(e) On THE Money Purchase Principle. 

216. For completeness of classification these headings are inserted 
here, because in the case of either principle benefits might be provided 
partly in advance and partly in arrear. The disablement allowance 
under the National Insurance Act may be regarded as a limited pension 



74 



SURVEY OF VARIOUS MKTHODS OK PROVIDING PENSIONS. 



!l 



I 



of absolute amount so provided. In the same way, pensions calculated 
s.h,n '";";^l'"'*'«^ principle, as in the case of an earlier sul«idised 
Chen e of the London & South Western Railway (see jmr. 222), might be 
rovKled ptrtly ,n advance and ,>ar,ly in arrear. In p.uctice! however, 
they are nearly always provided or estimated to be provided in advance, 
7LT- ', T T.""" "•' ^"'"'^'" description and consideration of 
in^vancT' ' " ''"''"^ '" "'*' '^'*^""'^ «f schemes provided wholly 

III. PENSIONS PROVIDED WHOLLY IN ADVANCE. 

(f) On a Salary Percentagk Scale. 

^„, '^■u\- ^""!"'S '•' ^^^ consideration of the cases where the employer's 
co„tnbut.on, hke that of the beneficiary, is paid or purports to be paid 
wholly m advance, we will first take schemes for providing pensbns 
proporfonate to the salary. Many of the .schemes of the g^J Always, 
hanks and mdnstnal companies would come under this general heading, 
but they vary a great deal in detail and not much is known publicly of any of 
them except the Rulway Funds. In many cases the employer's contribution 
would be set a.s,de,-egularly aceonling to a prescriM scale; in othe.^ 
la.-g^ums would be carried to the cre-lit of the Fund from time to time, 
acconhng to the prosperity of the company. But of the groat majorit; 

valuation would be made from time to time to show the progress of the 
J und : and secondly, that in the event of a deficiency appearing thero 
would be strong financial resouroes behind the Fuml available for putting 
matters ngbt. We shall find, in fact, cases where, notwithstanding the 
guarantees for security that exist, deficiencies aro so g,^t and perJst so 
long that It might seem more logical to have dealt with them in the 
previous section, as providing the pensions partly in arrear. On the other 

Ti ""^^T T^** "^'^^ '" "'^ ^^'^' ''^^'''y' ^-ob «« the schemes of 
the New Zealand Government and the London County Council, where a 

gradual strengthening of the financial sitmvtion suggests that the pensions 
may be provided ultimately wholly in advance. 

Railway Superannuation Schemes in the United Kinadom. 

218. The experience of the gi-eat I{ailway Suijcrannuatiou Funds is 
very mst- uctive from the point of view of the estoblishment of such a Fund 
as that suggested by the Hospital OHicei-s Association. Fortunately 
exma infopnation on the subject is readily available, as a Demit 
nicntol Committee wa.s appointed in li)08. under the chainna.iship of 
Lord Sou hwark, to enquire into the ,x.sition of these Funds; and its 
report (Cd. i>:549), together with the volume of evidence (Cd 5484) is 
deserving of careful study. \ /. 

219 There being If, Funds in all, we cm here refer only to their 
general features, but a^ there is a strong family likeness among them this 



PENSIONS PROVIDED IN ADVANCE: SALARY PERCENTAGE SCALE. 75 

course will be sufficient for our immediate purpose. Spealiiug quite 
generally they were started on a compulsory footing, at any mte as regards 
younger men and new entrants, the rate of contribution being 2 J per cent, 
of the salaries and the companies contriVmting a similar amount. The 
retiring age was to be 60, or in some cases 65, as a miniumm, or earlier in 
case of ill-health ; and the scale of pensions was genei-ally ba.sed on the 
average salary throughout the whole period of service, the [)eixjentage 
claimable ranging from about 25 per cent, after 10 years service, to 
67 per cent, after 45 years. 

•220. The Funds were to be valued from time to time by actuaries ; 
but about 1896 the members began to l^e jealous of the growth of the 
krge funds and demanded gi-eater benefits, while the compjinies saw the 
desirability of encouraging retirements for the sake of efficiency. Thus 
the benefits were both increased and antedated without or in spite of the 
opinion of actuaries; and by the time the Departmental Committee 
came to enquire into the matter many of the Funds had developed large 
deficiencies. For instance, in the case of the Great Northern Fund there 
was a shortage of £560,528, of the Midland Fund one of £843,202, and 
of the Gi-eat Western Fund one of £893,130. 

221. The position was regularized partly by decreasing the i>ension 
scales but more particularly by falling l)ack on the financial lesources of 
the companies, who in the majority of the cases definitely guai-anteed the 
benefits. They generally made increased annual contributions, but in 
some cases contented themselves with merely undertaking to make good 
the Ijenefits as and when these should become payable ; and thus the 
Funds would to this extent cease to provide the pensions wholly in 
advance. 

222. The Departmental Committee gave much attention to the 
respective methods of calculating the amounts of the pensions, the 
representative of the Railway Clerks Association, and also other witnesses 
representative of the general membership, having urged that what we 
have called the " money purchase " system was the only equitable one 
for the lower paid men ; and that a system in which benefits based on 
salaries— on final salaries more especially but also on average salaries — 
was unduly favourable to the officials with high salaries. The objections 
urged against the money purchase plan were chiefly two, viz., that it 
provides such poor benefits in the case of what are called " early 
retirements," where there is a breakdown of health, and that, where 
different meml^ers retired at different retiring tiges, the [tensions are 
not so good as in the other plan where retirement takes place at 60 
or at earlier Jiges, though it was admitted that they are better when the 
retirement age is 65. It was mainly for these reasons that the plan had 
been discontinued in the case of the London & South Western lilailwav. 

223. Lord Southwark s Committee concluded that in the case of thest^ 
large superannuation funds, subsidized and to a great extent guai-auteeil 



i 



76 



SURVEY.OF VARIOUS METHODS OF PROV.niNO PENSIONS. 



II 



based on salary percentages ; and this because it wa.s important that the 
co.npan.es should .. f..e to ..ti.. their otfice.. at suiS.t ,^'1,1 

ttt^Mrr'^" 'T (•'^^'"'"'^^PP«n<''xVr.) It is unlikely, however 
that th,s op.n.on W.1I ren.ove the se..so of grievance among the nink an 
file, wh.ch, aeco.^ing to the evidence, is very widespread. 

bener?but'm?.r*'f "'„"'' ^"'"''' ^'""^ ""''•"""y' ''^''''^ K"«""'t«<'d the 
"Ksnehts but made virtually no provision ann.ially for its futui^ Jial.ilitiP, 

the year l!)4o the Compa..y would be payi.ig £90,000 a..nually ; and although 
any such expen.se would rank even lH>fore the debentu,^ sto^k interest 3 

t rigrtrr:frT^^ "^ '^'"'"'^'^ ^"'"^' ^^^ ^^^^ committed tis 

It nght to refer m their report to the absence of provision for actuarial 
valuations m the scheme. "We cannot but consider." they remark™ 
that a system which allows a lai^e liability to accrue without provdW 
sufficent m^ns for gauging the amount of that liability must be ZS 
as unsound." And they added, "we consider that p^ri,xlicarva7S^ 
should be made even in the ca^ of guanuiteed funds." 

f K ^' .^" *'"'f *'S''""g the question of the contributions of the membei^ 
the Depa.tmental Committee found that, in geneml. higher mtes were 
ZT: as they ought to be. frem those who joined at the higher a^ 

.m^S on " "'T'T'"'' "" '"*"^"' ^"^^"^'^ of contributions were 
.mposed on such members as received advances of saUry kte in life It 

was agreed that, even where the pension is based on the avenge IL- 

and this question is of interest as the same basis is proposed in Mr. ManW's 

ttZt h^"^""'f -'•'^^^ "'^■"•^'^ ..ceived ki^er pension^^t an 

the contnbut.o,is on their behalf would justify. The rei^on for this fact"" 

somewhat technical, but it is stated by the Committee in popular Un™! 

with such clearness that we quote the passage in full : " A^he meS" 

they observe, " other than those admitted at late ages, contribute ^hySr 

at the same rate per cent, from their salaries, and the total contribution of 

ea^h member, without interest, is therefore the same percentage of the 

total salary received. The amount of the pension^ being^ a Led 

proportion of the average salaiy from membe.. with the same pe.-icKl of 

membei^hip. is also a fi.xed proportion of the toUl .salaiy, and itSeiSore 

without .nterest. In the case, however, of membe.^ whose sala.T is 

resZ ofTh?; ''' 'r ^""' *^ '■'''^'*^' "» '••« contributiZ in 
respect of the advances has only a few years to accumulate for the 

^ITZ , r." "^ ^°'"'""'' "'*" '"^^ - -'•- contribu ions 
and the accumulated contributions of s,.ch members, with interest 

therefore are less m relation to the amount of the pension received." 

noint^as 2'f T"""^ '""*''"''°" °^ ^'°"' Southwark's Committee on this 
po.„t was that there was not much ground for the complaint of inequity 
partly on the actuarial ground that higher paid office.; are dispoSd to 



RAILWAY SUPERANNUATION SCHEMES IN UNITED KINGDOM. 



77 



defer the pension age and thus relieve' the Fund, but chiefly for the I'eason 
before stated, that where the com[>any was contributing such a birge portion 
of the benefit, the average meml>er was not in a position to criticize 
principles adopted in the interest of the company as a whole. 

227. In ceitain Funds, where the pension is based on the salary of 
the last seven ye^rs only, the conclusion was not so clear. One company 
found that the retiring age of the higher paid officials under this plan 
was greater than in avemge cases ; but the experience of the Kailway 
Clearing System Fund was that such officials retired and took their 
pensions to an extent that imperilled the solvency of the Fund, with the 
ijesult that the system had been abandoned after l)eing in operation for 
only 10 years. 

228. Two other questions upon which the Departmental Committee 
expi-essed opinions may be quoted. They were : — 

(i) that where officers are retired before the pension age, for retrench- 
ment or other purposes of the company, any compensation 
properly payable over and above the return of the members 
contributions should be a charge on the employer and not on the 
Fund : and 
(ii) that any re-organization of the Funds on a uniform or aggregate 

basis wfis impi-acticable. 
There is no doubt that difficulties in connection with such retire- 
ments as are specified under the first heading contributed to the decision 
under the second heading. Mr. King, F.I. A., gave it to us in evidence that 
it would be very difficult to work anycentml fund as reganls "early retire- 
ments," i.e., on the ground of ill-health, this being a question upon which 
divergent views would be likely to arise between the constituent bodies 
and the centiul committee. 



Railway Clearing System Superannuation Fund. 

229. The Railway Clearing System Fund calls for special notice 
here, because it provides superannuation benefits not only for the staffs of 
the Railway Clearing Committees but also for those of the numei-ous 
milway companies of the United Kingdom not large enough to have 
separate Funds. It thus serves a body of diversified units, though not 
exactly analogous to the Hospitiils of London. 

230. The history of the Fund, showing the extreme difficulty of 
conducting a mutual fund with so many divergent interests, is given by 
its secretary (Cd. 5484, p. 241) and may be stated very briefly here. 
Initiated in 1873, on the basis of 2^ per cent, contributions, from lx)th 
employer and employee, applicable to lives of all ages, the scale of 
pensions was based on the average salary throughout service, with the usual 
returns in the event of resignation or dismissal, or of death either before 
or immediately after superannuation. The scale itself was an arbitrary 



78 



8UKVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



RAILWAY CLEARINO SYSTEM SUPERANNUATION FUND. 



79 



II 



one, commenoiDg with 2:, per cent, of the salary after 10 yea«' service 
mn.g to oO per cent after 31 yean, and 67 per It. after VreTrs. 

.!.» ^^l' •^" i^^^ """* ^^ **^" agitation for increase.! benefits but 

I ? ^^ri ^""^"*'' "''*"■ "g« 28. The actuaries seem to have had 
no sufficient data in the Fund's own experience to guide tim a! to tJe 
future, and they reported that if all memLre retired ^Wth , . ! 
deficit wa« P9i«Q.x> Tj. .1. "" ""''"'*™ rotirert at 60 the estimated 

£4 S l-h j ; • """^'^ ™*"^ *' «^ "'« deficit would be 

£mL K . °P""°" '"'" '•"'' *•>« ''«««» •"ig''t •>« put midway at 
fn si the^fi •"" "'''"''''' retirements at 62*. At the next val Ji^^ 
in 1888 the deficiency on a similar assumption had decreased to £71 28iL 

weT ^eTtle" ^-^7^ '"^ '"^~' '^ "««'«• ^'^ slSSp^te'me U 
were made in the miscellaneous allowances. 

expeSnce If I^f-^ "^'T''' '""""^ *•"**' **" '''' *««'■« «' *e Fund's own 
expeiience of retirement ages, a surplus of £98,115 existed. Meanwhile 

b^ieh ts, and the Committee at the time included Lonl Claud Hamilto7 
he Chairman of the Great Eastern Railway and an avowed advoS^te oi 

guarantee to make jroofl its oosf Thi. „. . ^ ®"^ 

* -.1- ,. ^^ '^' ^^^^ guarantee was not obtained • Imf 

Eto hat i " """ ""I' "' '^' '"""'*«'^ "«"» *» '"'ve appreciated 
rnLrltf ^'"'T '""'" '"'■«'" ^ '""'"'^ '■"^"""'We to the higher 
paid officials and prove dangerous to the Fund, but the requisite maiori tel 
approved the change, which dated from 1897. majorities 

aston?hVl«rcyVi:82;1ro:" "" "t'/"' ''^''^ *« 
Ti.„ * • ^""J^ *" fc482,937 on an invested fund of £1,112092 

The actuaries recommended the immediate reduction of^ieusions 
mcludmg those already existing, to "sixtieths" instead of "E"': 
by which means the deficit would be reduced to £2^5,123 The deficit 
appears to have boon chiefly due to the facts that the nfrea Jd betm 
induced a wholly unexf^ted flow of retirements among the tette^ S 
men over 60, and that the period in question coincided .T^t 
developments ,n railway management, resulting in higher salaries for th! 
supeiw officWs and a genenil pn^^sure to rehire p^on menThoToiw 
now be retired without hanlship. " 

accoSt tt°l^""? """"'T' "" ^''"™"'" "^ ">« *■•"«' Committee, 
accoiding to the evidence submitted to Lord Southwark's Committee. 



appears to have contested the principle of regarding future liabilities 
from the point of view of present value, and advised the ineml>ers 
to retain the existing scale and be content with the guarantee of 
the constituent companies, which he forthwith urged the latter to give. 
Such guarantee was, however, refused by some companies, and the 
members in turn, on a heavy ballot, refused the actuaries' reductions. 
Ultimately the Committee, on legal advice, had to impose the actuaries*' 
recommendations, whereupon the Kailway Clearing Committee and most, 
but not all, of the constituent companies came to the rescue and made 
supplementary grants to the existing annuitants, much to the relief of 
their old servants. 

235. Meanwhile meetings of members had emphasized the general 
desire to place the Fund on a secure footing, and in order to attain this 
object a new valuation was made in 1905, when it was found that 
the reduced deficiency of £265,123 had again increased to £318,268. 
Following the actuarial advice, the Committee gained the assent of the 
membei*s to such a revision of benefits as would restore solvency. This 
involved a retuni to a pension scale computed upon the avei-age salary 
for the whole period instead of for the last seven years only, and dated 
from 1st January, 1907. A special Act of Parliament was obtained 
by some of the constituent companies enabling them to supplement at 
their own expense the reduced benefits of all members who had l>een 
contributing under the too generous scale of 1897, as well as existing 
annuitants. Many of the companies, including the more important ones, 
acted under these powers and agreed to pay the whole difference 
necessary to raise the Fund's annuities to the level of that scale. The 
Railway Clearing Committee and some of the constituent coniixmies, 
however, in the case of their officers, adopted a sliding scale under which 
the proportion of the difference to be made good will be reduced and 
finally terminate as the dates of retirement become later. The Great 
Central and the South Eastern Companies, with 2,700 and 2,500 members 
respectively, withdrew entirely from the Fund in the years 1906-7, and 
initiated independent schemes. Thus after three or four years of conflict 
and costly delay the Fund was again placed, with the financial help of 
the constituent bodies, on what was expected to be a sound and equital>le 
l>asis. 

236. At the end of five years from the last valuation, viz., 
30th SeptemlKjr, 1910, another actuarial investigation took place. 
Owing to the defection of the Great Central and South Eji.stern 
Companies, involving a withdrawal of £332,813, the total funds, instead 
of showing a normal increase, were nearly the same as in 1905, being 
£1,252,313. On this amount, the iictuaries reported another astonishing 
deficiency of £427,305. As a trial valuation made in 1905, based on the 
new scale of l>enefits, had shown that the latter would sUirt with an 
initial surplus in the Fund of £50,822, it is seen that an advei-se 
movement in the actuarial position had occurred in the five years of no 
less than £478,127. 



80 



SUKVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



SCHEMK Sl'HMITTED BY HOSPITAL OFFICERS ASSOCIATION. 



81 






n 



237. As bearing on the correctness of the actuarial processes adopted, 
and their suitability for measuring the numerous minor and almost 
impalpable forces that enter into the working out of a complicated pension 
fund, the actuaries reported that, had they been justified in using the 
same mortality and other tables as in 1905, the valuation would have 
shown a surplus of £40,000, compared with the hypothetical one of 

•£50,822 in 1905. As a fact, however, the rates of mortality, of withdrawal 
and of ill-health among the members, and the still more important i-ate of 
mortality among actual pensioners, which had all shown signs of being 
unfavourable to the Fund in the years 1903 to 1905, continued to opemte 
adversely throughout the five years under review. The results of the 
hypothetical valuations just referred to suggest that these adverse 
influences had not yet had time to affect the actual outgoings to any great 
extent. The actuaries, however, had no option but to make this altered 
experience the basis of their forecast of the future. The large deficiency 
is thus seen to be due to the necessity of bringing into present account 
in respect of the whole future an assumed amelioration of life and 
health conditions newly measured by the experience of to-day. The 
importance of this i-esult lies in the fact that the improved conditions 
found to exist in the case of this Fund probably have been or will be 
found to exist in other Funds, with analogous results on their finances. 
And it seems clear also that any future experience pointing to further 
changes in fundamental conditions must have a further and similar effect 
on the financial position of all Pension Funds. 

238. The actuaries further reported that of the adverse forces 
referred to, the general improvement in longevity, as reflected in the 
lighter mortality among pensioners, was by far the most important. It 
accounted for 87 per cent, of the deficiency of £427,305. There was a 
further deficiency of £126,057 in the market valuation of the assets ; but 
as this could only come into operation when assets were required to be 
realized, and as the Fund enjoyed a guaranteed interest of 4 per cent., 
it was considered this depreciation need not be brought into present 
account 

239. Various alternative schemes were submitted by the actuaries 
in the way of increasing contributions or reducing benefits in order to 
restore solvency. For instance, in the former category, it would have been 
necessary to increase the contributions from employers and employees by 
over 50 per cent., or from the members alone by over 100 per cent. It 
was found, however, to be impossible to apportion the surcharge equitably. 
After much investigation and prolonged negotiations the Kailway Clearing 
Committee and constituent companies agreed to assume the whole 
responsibility for the deficiency so far as existing members were concerned, 
new members to come in on amended terms. A fresh valuation was 
accordingly made as at 30th June, 1913, the date of change, when the 
deficiency was found to have increased to £476,000, and the depreciation 
in the market value of assets to over £200,000. 



240. The scheme of relief finally agreed upon by the constituent 
bodies provided that the employers should bear the cost of the pensions 
of the members of their respective staffs retiring between ages 60 
and 68 until such members attain age 68, and pay into the Fund up 
to that age the full contributions in respect of such members. 
Age 68, called the "solvent age," was fixed by the actuaries at the 
point necessary to restore solvency to the Fund ; and it is expected 
that, as the older members pass out of service, this solvent age will 
gradually fall at future valuations. If a fresh deficiency should occur, the 
question of raising the solvent age would have to be referred again to the 
companies. A further special Act of Parliament was accordingly obtained 
enabling the comp«inies to enter into the pi'oposed arrangements ; and in 
the three years ended 30th September, 1916, sums amounting to nearly 
£55,000 had already been paid by them into the Fund on this account 
lieviewing the history of this Fund it is impossible to resist the conclusion 
that many, though not all, of its difficulties have arisen from its peculiar 
constitution as a Fund serving several separate bodies. We make further 
reference to this question later {see par. 245). 

The Scheme submitted by the Hospital Officers Association. 

241. There is of course no reason why pensions to be given under 
such salary scales as we have l>een considering should not be provided in 
advance wholly by the employer, and it is a scheme of this type that was 
submitted for our consideration by the Hospital Officers Association. 
It was formulated by the late Mr. H. W. Manly, F.I. A., an actuary of 
considerable experience in superannuation matters, who had given his 
help to the Association in constructing a scheme of a type that would 
meet its views, and who kindly attended one of our meetings in order to 
explain his plan personally. 

242. Mr. Manly followed the old Civil Service scale in naming 
age 60 and 10 years meml)ership as minimum qualifications for a 
pension, and also in allotting, as the measure of the pension, one-60th 
of the salary for every year of membership not exceeding 40 ; with, 
however, this important distinction that the Imsis is not the final 
.salary but, as in the case of the Railway Funds, the "average 
salary during the membership." This modification, which naturally 
reduces the pension considerably, was adopted in order to reduce the 
cost, Mr. Manly explaining that the cost of old Civil Service terms 
would be greater than his in the ratio of about 8 to 5. In order 
still further to reduce the cost, 'there would l^e no allowance on death or 
withdrawal, and all past contributions in respect of such cases would 
remain in the Fund. Cases of early retirement from disablement would, 
however, be pensionable. Taking the members of the administrative 
staffs (males of the servant or working class would cost rather less) the 
Hospitals would pay into a central fund contributions graduated according 
to the age of entry. For example, the rate would be 5 J per cent of the 
salary in the case of an entrant age 20, and 7 per cent, for one aged 30, 

F 



S2 



SURVEY OF VARIOUS METHODS OF PROVIDINO PENSIONS. 



older entrants naturally costing mere ; in every case in which there was 
previous service ranking for pension, an additional lump sum was to be 
provided to make up for the lack of past contributions. Mr. Manly had 
no suflficient data relating to the service experience and mortality experience 
of Hospital employees to enable him to present a final scheme, and his 
plan was thus only sketched in outline ; but as his knowledge of these 
matters was very great, and as, owing to the intervening death of the 
author, it cannot now l)e elaborated by him, we have printed the scheme 
as presented to us in Appendix V of this Report. 



I 



243. Mr. Manly was quite unable to estimate, without exact data, the 
total amount of the lump sums which would have to be set up at the 
outset, if the whole of the existing stall's were to be included. If we 
assume an average present age of 35, the lump sum mte is 4 per cent, of 
the past salaries. Supposing an average past service of 10 years, and 
an arithmetical progression of salaries, this would mean the immediate 
provision of a sum equal to alwut 30 per cent, of the toUd existing salary 
list. Mr. Manly himself seems to have had cognizance of 159 male 
servants with wages of about £12,0(X) per annum, and 141 officers with 
salaries of about £22,000. It so happens that his own rough estimate (see 
Appendix V) of £8,00(» or £10,000 as the total of the lump sums for this 
body is very near 30 per cent, of the annual salaries, after allowing a 
slightly lower rate for the weekly wage class. This sum would need 
to be supported by an additional annual contribution, over and above 
the standard rate for young entrants, which may be taken at '2^ or 
3 per cent, of the salaries (see scale suggested in the scheme). This must 
also be regarded (see par. 357) as ptirt of the cost of providing for 
the existing staffs. It may be taken as equal to a lump sum of about 
40 per cent, of the salary list. This, added to the 30 per cent., represents 
a total cost for existing staff's of something like 70 per cent, of one yearns 
salaries. 



i 



244. This l>eing the only scheme submitted to us in any detail as 
one likely to meet the views of the Hospital officers, it calls naturally for 
consideration. We do not lay undue stress upon the great cost of 
initiating the scheme, as regards either the capital sum to be set up in 
respect of past service or the high contributions that would be payable 
in respect of all the older members of the staffs, because these are 
features that must be faced in regard to any self-supporting scheme which 
sets out to provide in advance pensions for beneficiaries who are already 
getting towards the age of retirement. At the same time the initial costs 
are serious, and even if some means were devised, to provide the capital 
sums required, it would need a considerable effort on the part of the 
Hospitals to contribute the high pereentages needed for the older officers. 
If, on the other hand, the beneficiaries were to contribute to the cost, 
it would be necessary to introduce, not only provisions for their 
representation on the governing body, but provisions for return of their 
contributions on death and withdrawal. This in turn would increase the 
scale of contributions and generally dislocate the proposals. 



I 



SCHEME SUHMITTED BY HOSPITAL OFFICERS ASSOCIATION. 



83 



(( 



(( 



245. The other difficulties inherent in any scheme of this kind are 
those which most invite criticism. In the first place, the provision of 
a governing body and the settlement of the powers to be conferrecl 
upon it, as to administration and actuarial standards, would not 
be easy in the case of a heterogeneous body such as the voluntar)' 
Hospitals of London. As we have already remarked on an alternative 
proposal (see par. 151), it is difficult to conceive that the Hospital 
Committees would delegate to any central council the power to decide 
whether, for instance, an important official should or should not l>e retired 
for reasons of health. Yet from the point of view of the solvency of the 
fund, no question would need to be more jealously watched by the 
central council than such " early retirements " ; and we have already 
seen (see par. 228) that it wjis difficulties of this kind which led Lord 
Southwark's Committee to report against the possibility of combining the 
Railway Superaimuation Funds on any uniform basis. Mr. King, an 
a<5tuary of great experience, informed that Committee that it would lie 
" very dangerous to have one fund for all the Railways, because each 

Railway would take advantage of it to dump its officei-s on it as soon 
as possible "; and Mr. King also advised us against a fund of this type for 
the same reason. In fact, we cannot hear of any case, with the exception 
of the Railway Clearing System Fund, the history of which we have just 
investigated, where a mutual fund has existed in similar circumstances ; 
and several witnesses liefore the Departmental Committee attributetl the 
deficiency in this Fund to its having been " swamped " with retirements 
over which it had no control. It was this power of the constituent 
companies at any time to upset the Fund by changes in general policy 
that led most of the representative witnesses and also the secretary 
of the Fund, Mr. Cnidge, speaking for himself, to advocate a central 
fund strictly on the money purchase plan, in spite of the admitteil fact 
that this would necessitate a supplementary organization for meeting 
cases of bi-eak-down of hciilth. 

246. In the second place, the liabilities of such a body would 
project into the distant future, and the difficulties of providing against 
losses on investments and fluctuations in the future rate of interest, 
are very great. The rates of withdrawal from service and of survival 
to the pension age are likewise uncertain, but most of all the 
ultimate rate of longevity of the beneficiaries. Finally, as there is no 
definite law of increase in the salaries, neither the contributions to \ye 
received nor the pensions to be payable ultimately are exactly known. 
Mr. Manly admitted to us in evidence that all these uncertainties, which 
we have already mentioned (see ^mr. 127) as incidenttil to all mutual funds of 
this type, and to which the history of the Railway Clciiring System Fund 
and other Railway Funds l)ears witness, are inherent in his scheme. It 
does not, of course, follow that the payment of the ultimate pensions is 
thereby wholly jeopardized; for the scheme would be based on the 
experience of other funds, and periodical valuations made by an actuaiy 
from time to time would show how the fund was progressing. In the 
event of a deficiency the contributions could be increased, or the l>enefits 

f2 



84 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



ABSOLUTE SCALE : PROPOSED SCHEME FOR YOUNG NURSES. 



85 



w 



$ 



reduced, in order to effect an equilibrium ; but while this would be the 
position in theory, it may be suspected that in practice the former 
alternative would prevail and the full bnmt of any deficiency fall on 
the Hospitals. We must, therefore, regard the admitted actuarial 
uncertainties of schemes of this type as a further disadvantage. 

247. So far we have referred only to Mr. Manly's proposals for the 
salaried staff's and male weekly wage class. The permanent elements 
of the nursing staffs and female servant class would together represent 
a salary list equal, perhaps, to each of those male classes (se^ par. 369). 
Mr. Manly proposed that these large bodies should receive no pension 
unless they served 20 years or more, and attained age 55 ; and also, 
apparently^ that the principle of payment in arrear should be relied on 
in part for the financial provision of the pensions. By these means he 
reduced the present cost to 5d. or 6d. per head per month. We regard 
limited proposals of this kind as insufficient. 

248. It may be added that Mr. Manly drafted his scheme on a 
non-contributoiy liasis, and it was put forward by the Hospital Officers 
Association on that footing in view of their opinion that, on the basis of 
their present salaries, the officers could not as a class afford to make 
contributions. It thus raises a general question which we must reserve 
for discussion later. Mr. Manly informed us that he generally 
recommended employers to pay all contributions and thus keep questions 
involving general policy in their own hands. This was a conclusion to 
which he had been led after a long experience of the contributory system 
in the case of railway and other mutual funds based on the salary 
percentage principle. He appears to have assumed that the combined 
Hospitals would pay all expenses of management, and to have made 
no provision for these in his calculations. The cost of the scheme is thus 
under-estimated to that extent. 



(g) On an Absolute Scale or Fi^t Kate. 

249. Leaving the consideration of pensions which, while they 
bear a relation to the salary, are themselves of indetenninate 
amount, we may now point out that pensions of a fixed absolute 
amount, such as those provided for old people by the State, may be 
provided for in advance. For instance, a body of employees might have 
pensions of £10 or £20 or £30 per annum provided for them, possibly 
by contributions paid into a separate fund suppoited by guarantees, 
or more suitably by effecting definite contracts either with the Post 
Office or with an insurance company; and we believe that pensions 
of this type are in fact provided by some large industrial firms for their 
employees. Mr. King described to us one such scheme, carried out under 
his advice, where he had been able, owing to the large contributions of 
the firm, to reduce considerably the original scale of contributions of the 
employees. 



The Proposed General Scheme for Young Nurses. 

250. The most obvious illustration, however, of pensions of this 
type is that aff()rded by the affiliation schemes of the Royal National 
Pension Fund (see pars. OS and 69). The amount secured to each 
nurse may, and probably does, differ somewhat in the diffbrent Hospitals, 
but for each separate scheme the pension would be at a fiat rate, and 
if the general scheme which we have recommended (see pnv. 105) fiir 
all young nurses should take effbct it would find its place in this ciitegory. 
A general scheme of that type, capable of being extended at any time to 
provincial Hospitals, might in process of years thus provide for all nurses 
a certain minimum pension at a flat rate. Such a system could never be 
a complete solution of the problem of pensions for nurses, but it would 
provide a useful foundation upon which further sectional or individual 
provision could be based subsequently. 

251. As regards the main problem before us, however, any scheme 
that would meet the conditions of the permanent Hospital staff's must 
provide, as we have ali-eiidy pointed out, for pensions varying in amount 
with the official positions of the beneficiaries : in other words, the 
pensions must bear, some sort of relation to the salaries. As the 
contributions in practice generally bear some relation to the salary, and 
are thus more or less prescribed beforehand, the problem of purchasing 
pensions of definite amount takes the form, for our present purpose, 
rather of what pension can lie granted for a certain contribution than of 
what the cost will be to provide a certain pension. 



(h) On the Money Purchase pkinciple. 

252. We will proceed therefore to consider some types of schemes 
based on the method by which pensions of calculated though varying 
amounts are secured in return for certain present contributions. Where the 
amount of a pension depends upon some rule or principle the operation of 
which leaves us in ignorance of the ultimate liability, we are faced with many 
difficulties in preserving a balance between the liabilities and the assets, as 
has been so fully discussed under heading (f) and in connection with 
Mr. Manly's proposed scheme. In this section we approach the question 
purely from the point of view of the present cash available, and of the 
benefit which can be purchased with it. The latter may be either as free 
from unceitainty as is consistent with the working out of a mutual fund, 
or it may be made entirely so by purchasing it from an insurance company. 



Elementary School Teachers Deferred Annuity Fund. 

253. The first illustration of this principle which we take is the 
Deferred Annuity Fund of the Elementary School Teachers It provides 



86 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS." 



for each teacher, on the money purchase plan, a deferred annuity ; and 
this is supplemented by a superannuation allowance for which the 
State, as usual, makes no provision in advance. Differing from the 
cjise of the other State funds, or nither schemes, that we have noticed, 
both these benefits are independent of the salary, and the deferred 
annuity portion represents the benefit purchased by the teacher's own 
contribution. This is a fixed amount of £o 12s. annually for a man, 
and £2 8s. for a woman. The money when collected is paid over 
to the National Debt Commissioners to be invested in government 
securities. The mutual fund thus created receives no tissistance from 
the Government, except for the cost of management, and on retiring 
at or after the age of 65 the teacher receives out of it an annuity for 
the rest of his or her life. 



254. The amount of this is calculated fi-om certain Tables which are 
subject to revision from time to time, according as a septennial valuation 
shows whether or not they are justified by the experience. These 
Tables show, for each fixed contribution made at the various ages, 
the amount of ultimate annuity secured thereby. Even though a teacher 
should have made but a single contribution to this Fund in the course 
of his life, and should then have left the teaching profession, he will 
yet, on arriving at the age of 65, be able to claim the annuity which 
that contribution represents. A teiicher cannot take out his contributions 
from the Fund, and if he dies Ijefore 65 his estate receives nothing. 
Similarly his estate receives nothing, except any amount of annuity 
actually due up to the date of death, if he dies soon after the annuity 
begins to be pjiyable. According to the present scale the annuities to be 
received by entrants of 25 after 40 years service are in the case of 
men £37 15s. lid. and in the case of women £19 5s. 4d. 

255. It will be observed that a scheme of this kind eliminates many 
of the elements of uncertainty inherent in schemes based on a salary 
percentage scale. The benefits payable being defined, the main elements 
the actuary is left to deal with in his valuations are (</) financial, such as 
the future rate of interest and the value of the assets, and (0) actuarial, 
such as the future i-ates of disablement and mortality prior to age 
65 and, even more important, the ultimate rate of longevity of the 
annuitants. A fund of this type cannot Ik? said to furnish a definitely 
assured benefit in exchange for the fixed contribution, but one as good 
as can be granted according to the working out of a mutual fund 
invested in government securities, after leaving margins for safety in 
resfject of the uncertain elements entering into the calculations. In the 
case of this particular Fund, however, which has a statutory Iwisis, there 
seems little doubt that the State virtually guarantees all annuities already 
effected. 

256. In 1913 the second valuation of the Fund fell due, and the 
results have recently been published. The accounts of the Men's and 



MONEY PURCHASE PRINCIPLE : ELEMENTARY TEACHERS FUND. 



87 



Women's Funds are presented sepjirately, but combining the figures it may 
lie state<l shokly that the value of the liabilities was £3,346,397, and that 
of the assets £3,020,596, with the result that there was a deficiency (which 
was cliieHy, as a fact, in the Men's Fund) of £325,801. As the total 
amount of cash invested had been £3,467,974, it is seen that the deficiency 
was wholly caused by the fall in the value of the investments, 
which consisted of 2J^ Consols and Guaranteed 2J% Stock. The 
reporting actuary pointed out that, at their present mai'ket value, 
the investments yielded 3 J per cent, interest, whereas the Trejisury 
had instructed him to value the liabilities at 3 per cent. Had 
3J per cent, been used throughout, the deficiency would have disfipixMiretl. 
Further, the liability to realize assets, even for annuities purclia^sed 
by the past contributions, was remote ; and with the fresh contributions 
of the future would be still more remote. The realizable value was 
therefore a matter of less pi-esent importance than the annual intere.st. 
For these reasons the actuary was satisfied as to the stalnlity of the 
Fund, and advised that no special steps were necessary to deal with 
the deficiency. 

257. It was pointed out, however, that the Tables of rates for 
granting the annuities ai*e out of date. Little Wiis known of the 
probable mortality among teachers when the Fund was institutetl, but 
now the ascertained experience of the Fund itself is available. This 
experience, in fact, has exhibited a very considerable longevity among 
retired teachers, and it will naturally receive the attention of actuaries 
when the rates of contribution for any similar pension fund in the future 
are being settled. 



The Federated Superannuation »System for Universities. 



258. This scheme is of interest from the point of view of our present 
enquiry because it is the latest outstanding example of a system devised 
(i) to furnish pensions accoi-ding to the various contributions on the 
money purchase principle, (ii) to provide that the pensions shall l)e secured 
and fi*ee from uncertainty without the support of any extraneous 
guarantee, and (iii) to afford free facilities for migration from one institution 
to another within the scheme. It is also a less essential, though popular, 
feature of the scheme to offer the option of a death benefit to such of the 
beneficiaries as may elect for it, of course at the cost of diminishing the 
pensions. In the Report of the Departmental Committee on the 
Superannuation of Teachers (Cd. 7365), the main part of which is 
concerned with |X5nsions for the teachers in the numerous secondary, 
technical and training schools and colleges, and other institutions, 
intermediate between the elementary schools and the univei'sities, we 
find a full description of the Universities System which it will be 
convenient for us to repeat here : — 

The Scheme is described in the Second and Third Reports of the Board <rf 
Education Advisory Committee on the Distribution of Exchequer Grants to 



88 



«UKVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



FEDERATED SUPERANNUATION SYSTEM FOR UNIVERSITIES. 



8U 



tif 



Universities and University Colleges in England (Cd. 6617 and Cd. 696l)) and in a 
HnS'ft '""" ' '" June 1913. by a Joint Committee representingtthe Universities 
and Colleges, as a result of negotiations with some of the chief insurance companies. 

!>« JJllT'"" i"T n ^*"^ u^"^^"" ^"^ ^'^ follows :-Anuual contributions are to 
o^H^ Jl T*'-.''^ all members of the teaching and administrative staffs within 
!nd H?p!^ ^'^ 'T\' ^'"P^'^y^^ '" ^'^^ Universities and other institutions concerned, 
fnl f ^'P^V "''"f M '''^ ^"^ *'"^""^ ^" "^^ to 10 P«^- cent, of the salary. The 
institution IS to contnbute at least 5 per cent, of the teacher's salary but may 

Zcontrihr"'^ and the teacher himself is to find the balance of the c^ntnbut.oZ 
navnw n?a "^'^ *' * ^^"^"^^ '""^^ '^ ^ *PP"^ ^'y *'»« «overning Bo<ly to the 

freHo ohLi?'?''™ """ir i^^Y^I^^.Hicy- The teaclier is. within certafii limits, 
intnrini ^^""r" ^H^- ^'"^ °^ '^"^'^*« ^^ »^ '"^^^ed by this policy, and the 

ms ranee company from which t is to be obtained. He mu'st cho^ one of the 
^trZ f T^ *"'\ described m the pamphlet issued by the Joint Committee 
referreil to above. A common feature of all these policies is that they include an 
S^v tlin"k'r'"Kf '^'' '^'l*' ^'"^'^ '^' •^"^^^ injures, or. so far as tL Coveting 

a^trmat^':;rtiX"^^^^^ " "'""'''"' ""' ^^^"^"^^ ^"' ^" ^'^^ p^"^'^' 

choio«*•T«^TnV''^ ""r *yP^' °^ V^^^^' ^^^'^" ^'"^^"^ *he beneficiary has his 
of ^ ^f^fl . . r™^"' assurance polices, with profits. These secure the payment 
or aM,U 1 T 4'"' ^}^'^^H'[ ^"""'^y) °" *^« beneficiary airiving at the a|e of 60. 
Ti±Ll ''^ V f- <*).I^f«"'«d annuity policies with return of premiums 
^ urn!^H """""-^'^ (or equivalent cash sums) payable from the age of 60. with a 

I?e of fi^ ?? nr'if'"' '"'-^'^'^^ ^" ^^« ^^^'"^ °' ^««'»^' or surrender before the 
^uZ\T^' ^^> ^^f®'^''^, annuity policies without return of premiums. These 

tt^^iH no r"^ ^ ^"; V'" *^^m°' *^' *»"^ '° ^»^« «^«n^ of death befoi-e that age 
there is no payment whatever. There are different varieties of each of these three 

Six insTanf "^'"^ "^"-^ beneficiary the choice between thirteen different Tptio^ 

pinTse of thHT'"' ^""t *r-° ^^""^^ ^y '^« Joint Committee for the 

one^r morl of fh«?h- f™' ^?^ ^^''^.^ fPP^'^"^^ ^^^ ^^^ ^oint Committee for 
one or more of the thirteen options. Under the first type of policy the beneficiary 

the%h?rdlir ^'r^'^rlJu^'^^^P'*"^^^' ""^^«^ the seco^n^betCnUo; anduS 
the third between two. The rates at which the companies are willing to do the 

auS'wThr' '"''*' ^" "" P*?P^'^«*' *°^ '^PP^- to"^ '^ lower than tCe usu^^ 
S^thi svst«^''']^^'"''K'^K'^-°*'*y "^r^" °^ *'^« P"''"^'- The teacher who 
fhr^LJ^- ^ •« ^^'"* ^y ^*^*"« * Po"«y *»''«" out on his belialf on which 
the premiums will amount to 10 per cent, of his salary ; and as his salary rises 

Xry^'^reToinf r '"''?. ^-shVcy being taken f^^ :a^h"^25 oMnlS 
,wZ;.«f 1- ^om^nttee have arranged with the companies that these 

o a sSJK T r\-^ g'^l^ ^'^*^°"^ f"^l^«r "^^^'^^^^ examination, subj^ 
K^l ^^'^ declaration by the member as to his health. The policie^ do not 

lapse on non-payment of premium, but remain in force as paid-up poHcies for such 

SXairnalb'rr'n " *^l-"^»-' ?f P»^-iums pafd bea^rsCthe nuXr 
Sth«Ln^«fif!\/ ^'"^'"^'^.^'"^'"^^tthe age of 60 does not retire and 
a^ al ow i^telst f;« companies hold the policy moneys for him until his retirement, 

one comDanv^ Th« W P ""^ ^ Yf' '^''\^' *°""°^ (^* ^' ^»*- '« *he case of 
one company). Ihe Joint Committee in the r pamphlet give a soecimen pasA of a 

r^t^Jr'artbr''" 'I"«^^^'Tu*' '>« ^^ °^ SaVremaSI in en!^o>Znt until h: 
ofSoavetZil'l ^'.^'"^ ^^ ''. '"PP^.^ ^""«« this period to draw a salary 
aL and th^^oV i^^ '' ^"^ T*" ""! ^^' ^^^"^ °' ^^^0 a year until he is 50 years of 
ff^hl .? ^T * year from the age of 50 to the age of 60. Such a member 

f he chooses an endowment insurance with profits, is shown as likely to r^^e if 
he bonuses of the companies concerned are continued in future at the sTm^^'as 

£m ""^ilbrlnll^' r.K^ ^ "^"^°« '~" ^2.100 to £2.700 (equivaTent ^Tnton 
Aiab-£249) according to the company, and the form of policy wXich he chooses • 

^iX^T'Ih'' •"' ^''''^- '^ '' '^'' Pl*^^ ^' 'he age of 4^. ran^nglrom £iml^ 
fit'^of i ^t '?^r^° ^"^'"^^ ^''^ooses a "defen-ed an.fuity policy S a 

deafh it th^ fJiVtAa (equivalent cash. £2.232-£3.128). or. in the event of his 
death at the age of 46. a payment ranging from £640 to £854. If he chooses a 
deferred annuity pohcy without a retSm%f premiums, he is shown LXlTtS 
receive a pension ranging from £273 to £296. and the payment in t^ ^ent of\i^ 
tTlt ^Ir '!;" ^«V ."^ ''' ^"^^^ this type of policyVnil. The Governing R^y 
of the Universi y or College at which the member is employed are to hold hf pSSv 
at th«Tn«T'r-^^^"^ approved benefit in trust for the beneficiary so long as he rema ns 
^vV^r n ''m '.?"l*h^ beneficiary is to execute some fofm of legal d(iument 
jvhich will enable he Governing Body so to do. Upon the transfer oTa be^fida^J 

Ir^eS L'fit w U V^ '"1*"^ r.''''l ^'^° '^''^''' «>-tem. the whde of ?h^ 
accraea benefit will be transferred to the second institution, or in other word« 1 

t'^ZX \" k'°'^'' I'T r "^^'''""°° *o another loses nothing of hTs Tns on 
?n?lTnf ; J *^^ ^^^°,^ °^ * beneficiary leaving an institution before the Lfof^S 
and not taking up employment in another institution within the system he is to 
iW?f!f ' "'^Vl 'k' 7^°^° °^ *h" ^«"^«d ^n^fit. but the GoverninrBc;dy o tl^ 
Wfi"'i;^tive^^ ^ '^ ^*^« *^« "6ht to determine ho^ Z'^A^ 



259. A federated system evolved by a somewhat hetei'ogeneous 
body of universities and collegiate institutions must natunilly claiui the 
attention of a body of diversified units, such as the voluntary Hospitals, 
when considering the pension question. But notwithstanding many 
points of analogy between the Universities and the Hospitals a 
fundamental ditterence emerges in the matter of finance. The Univei-sities 
i"eceive liberal subsidies from the Exchequer, and the l><>ai*d of 
Education, in making the distribution, had set aside and earmarked 
a sum of £8,400 per annum to he exi>ended on sui)erann nation, and 
this was not finally granted until a satisfactory superannuation scheme 
had been elabonited and accepted by all parties. Ultimately, no doubt, 
the liabilities of the Universities for their share of the contributions 
may exceed the £8,400 allotted by the State ; but, as the scheme 
is compulsoiy only as regards new appointments and thei-e will thus 
be a margin for many years to come, the Universities no doubt 
considered that they would run little financial risk by falling in with 
the Board's policy. 

260. We discussed this scheme with the representatives of the 
Hospital Officers Association and they expressed some objection to it on 
the following grounds : — (i) tliat the death benefit could l>e provided by 
the officer himself and was no necessary i>art of a pension .^icheme, and 
(ii) that in relying on insurance companies it must necessiirily be 
expensive as it had to contribute towards the profits and expenses of 
their business. With regard to the first point, we propose to discuss 
the general question of a death benefit later on (see par. ;>36 et sty.). 
With regard to the second point, the companies selected are old and 
wealthy, and scarcely dependent on fresh profits in the commercial sense. 
Their so-called profits when realized are returned largely or wholly to 
their assured members with, as we shall find later on, somewhat striking 
results (see par. 426, aiso Appendix IX, pars. 6 and 10). They are 
skilled in finance and quote their terms in keen competition ; while 
the element of expense, which cannot be small if the financial contml 
is to he efficient, would likewise be present in the case of a mutual 
fund. It is, however, after all largely a question of facts and 
comparisons to determine whether the benefits offered are as good, 
havin'g regai-d to the security, ofjered by the companies, as can lie 
obtained by any other method*. ' T • ;: i 

261. The provision of a death benefit no doubt complicates 
comparisons and makes it difficult to weigh the results of this system 
against those of a mutual pension fund ; but, as stated in the foregoing 
extracts, this is not an inseparable feature of the Universities scheme, and 
it may be convenient if, leaving for the moment the question of the death 
benefit, we proceed here to investigate the terms on which guarantee* I 
pensions may be purchased from insurance companies without any death 
benefit at all. Specimen quotations will be found in the following Table, 
extracted from the official pamphlet of the Universities scheme or from 
published prospectuses : — 



do 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



Annual Premium for a Pension of £10 per Annum on a Male Life 

{the premiums being not returnable in the event of death before the pension age). 

(a) Pension to commence at 60. 



Age 

at 

Entr>-, 



rublished Bates. 



Sun Life Assurance Society. 



F.S.S.U. Terms. 



Legal & Gcncml Assurance North British & Mercantile 
Society. Insurance Co. 



21 
30 
40 



£ s. <1. 

1 10 

1 13 2 

3 2 2 



£ 


S. 


d. 




18 


6 


1 


10 


6 


3 





3 



£ 


s. 


(1. 


1 





3 


1 


13 





3 


3 


11 



(b) Pension to commence at 65. 



A0D 

at 

Entry. 



Published Rates. 



Sun Life Assurance Society. 



F.S.S.U. Terms. 



Legal A General Assurance 
Society. 



North British & Mercantile 
Insurance Co. 




262. These figures are interesting, but they are inconclusive from 
the point of view of comparing the benefits with those which might be 
obtained from a typical mutual fund, say of the Railway type or that 
suggested by the Hospital officers. From the nature of the case an exact 
comparison is impossible between a system where definite benefits are 
purchased with certain contributions and another where the l^enefits 
themselves, and therefore the cost of them, are indeterminate from the 
outset and are a matter of estimate. Still, something useful may be 
arrived at by taking certain type cases and seeing how they would work 
out under the different methods. 

263. For this purpose we have constructed, using materials 
supplied to us by the Hospital Officers Association, some typical 
careers of Hospital officers as a basis for further calculations. Type 
Case I begins at age 24 with a salary of £100, which rises gradually 
to £500 at age 41 and £600 at 46. Case II begins at 20 with £60 and 
rises more slowly to £250 at 42 and £400 at 53. Case III is a dispenser 
who starts at 24 with £80, gradually rising to £250 at 43 and £300 at 50. 
In each case £25 per annum is added as the value of partial board or 
other advantages.* Selecting from the last Table the most favourable 
rates quoted in the Universities pamphlet (those of the Legal and 

* Exact particulars of these type cases are given in Appendix X. 



federated SUPERANNUATION SYSTEM FOR UNIVERSITIES. 



91 



General Office) for deferred annuities without any return of premiums on 
death, we have had calculations made showing the pensions that 
could be purchased with 10 per cent, of the foregoing salaries ; and in the 
following Table the results are set out and compared with the pensions 
that would be paid under the Hospitiil officers suggested scheme and 
under the old Civil Service scale : — 



Particulars of Type Cases. 


Amount of Pension commencing 
at 60. 


Amount of Pension commencing 
atC5. 


No. 


^'"'y- to age GO. 


Old 
Civil 
i Service 
Scale. 


Hospital 

Officers 

proposal. 


F.S.S.U. 
Deferred 
Annuity 
(without 
return). | 


Old 

Civil 

Service 

Scale. 


F.S.S.U. 

Hospital Deferred 

(Officers Annuity 

pro)K>sal. (without 

t return). 


I 

II 

III 


£ 

625 

425 
325 


£ I £ 
447 375 

i 

257 283 

i 

238 195 

1 


£ 

268 

171 
143 


£ 

336 
230 
185 


£ 

417 

283 
217 


£ 
312 

184 

165 


£ 

582 

400 

320 



t The average salary on which these are based is of course rather larger than stated in 
column 3. 



264. The Hospital officers proposed pensions, it will be 
remembered, were reckoned as one -sixtieth for each year of .service, 
but were based on the average salary, not the final salary. It is so 
common to reckon pensions in one or other of these ways that it will be 
interesting to convert the foregoing results into their relative proportions 
for each year of service ; and this is done in the following Table : — 



Type 
Case 
No. 



I 

II 

III 



Pensions commencing at 60 and reckoned on the 'Pensions commencing at C5 and reckoned on the 



Final Salary. 



Average Salary. 



Old 

Civil 

Service 

Scale. 



:u: T 



F.S.S.U. I Hospital 

Deferred | Officers 

Annuity, i proposal. 

tl 



F.S.S.U. 
Deferred 
Annuity. 



Fical Salary. 



Old 

Civil 

Service 

Scale. 



F.S.S.U. 
Deferred 
Annuity. 



Average Salary. 



Hospital 

Officers 

propotial. 



F.S.S.U. 
I>eferred 
Anuuitv. 



One 60th 
One 60th 
One 60th 



One 67th One 60th 
One 74th One 60th 
One 63rd One 60th 



One 48th 



One 60th One 44th One 60th 

One 45th One 60th One 48th ,: One 60th 

ii ' II 

One 46th i One 60th ' One 42nd " One 60th 



One 33rd 
One 3isi 
One 32nd 



265. It will be seen from these figures that a definite deferred 
pension can be purehased frem an insurance connmny, with 10 per cent, 
of the salary, which compares fairly well with the old Civil Service scale, 
based on final salary, even when retirement takes place at the most 
favourable point for an early entrant under that scale — viz., age 60 ; while 
compared with pensions based on the avei'age salary plan, which is that 
we have seen to be more usually adopted in superannuation funds, the 
deferred annuities are considerably better throughout. As the age of 
retirement is postponed beyond 60, the deferred annuities l)ecome 
rapidly better still, so that at age 65 it is seen they yield pensions of more 



i)'2 



SURVEY OF VAKIOUS METHODS OF PROVIDING PENSIONS. 



FEDERATED SUPERANNUATION SYSTEM FOR UNIVERSITIES. 



93 



tban "fiftieths" for each year of service even when reckoned on the 
final salary. In fact they approximate to the final salary itself, and ai-e, 
therefore, far in excess of 100 per cent, of the avemge salary. This 
feature of the money purchase principle must not be lost sight of It is 
important to avoid any positive inducement to an officer to go on working 
after he has passed his best just as it is to remove any causes that render 
such a course obligatory. 

266. It is, however, necessary to ctmipare, not only the pensions 
resulting from each system but also their cost. The Universities 
scheme is based, as we have seen, uix>n an invariable contribution of 10 per 
cent, of the salary. According to Mr. Manly's estimates, the contributions 
under the Hospital Officers scheme would be about 6J per cent, of the 
siilary for Type Case I, something over oh per cent, for Case II and alK)ut 
n per cent, for Case III. Such a difference in the scales of contribution 
makes any comparison between the schemes inconclusive. As regards 
the Civil Service scale, Mr. Manly gave us his opinion that its cost is 
greater than that of his proposed Hospital Officers scheme in the ratio 
of 8 to 5. On this basis the contributions for such a scheme as his but 
based on final salary instead of average salary would be about 10 per cent, 
for Type Cases I and III, and about 8| per cent, for Ca^e II, as compared 
with the 10 per cent, throughout levied under the Universities plan. So 
far, therefore, as the last Table is concerned, the columns headed " final 
salary " would seem to affoi-d the better basis for comparing the respective 
benefits. If we take Type Cases I and III, the contribution being 10 per 
cent, in both cases, it is found that the pensions at age 61 would be 
about the same under both plans. For all higher ages the Universities 
annuities would be greater. It must be remembered also that the 
deferred annuities given in the foregoing Tables are definitely guaranteed, 
and that on withdrawal a proportionate part of the benefit would 
permanently enure for the benefit of the member ; whereas in the case of 
the suggested mutual fund, the pensions would depend on the working out 
of various estimates which might eventuate better or worse than the 
expectations, and no benefit is provided for those withdrawing. The 
comparison cannot be said to be conclusive, but we think the facts, so far 
as they go, do not support the contention of the Hospital Officers Association 
that resort to insurance companies is necessarily expensive, even though 
including provision for expenses and possible profits. In the case of 
Mr. Manly's scheme no provision was made for expenses (see par. 248). 

267. Objection may be raised to the Federated Universities System 
on the ground of the absence from the scheme of a provision to meet 
fully the case of disablement through a break-down of health. This is 
cleariy a great disadvantage. Our review has shown that such cases 
must and do occur, and under the Universities System the only sum 
immediately available on disablement is the surrender value of the 
policies. Thus the officer, if he possessed no independent income 
such as would enable him to exist and to maintain the policies in full 
force until maturity, would be faced with the unpleasant alternative of 



1 



either surrendering the policies to get some immediate i-esources or 
existing in penury until the policies matured for the reduced amount 
corresponding to the number of premiums actually paid l)efore 
disablement. The latter alternative is an impossible one but it shows 
the nature of the hiatus which must be filled in order to remove this 
disadvantage of the scheme. We propose to discuss the general question 
of disablement later on (see par. 428). 

268. On the other hand, the Universities System possesses many 
advantages. The benefits are assured with a high degree of security. 
The employer knows that, when once his contributions have Ijeen made, 
he can have no fear of further responsibilities, expressed or implied, such 
as have faced the Railway Companies and other employei-s subsidizing 
mutual pension funds. And, further, while employers and officers alike 
are free from the anxieties of administration and investment of funds, the 
system is flexible in working and adapts itself readily to the changes 
following transfer of service among the institutions which have entered 
into the federated scheme. Finally, in the event of the officer chiuiging 
to an institution outside the scheme, the existence of the pension policies, 
which enure for his l^enefit, directly raises the question of his provision 
for old age and of the new employer contributing to it. 

26iK The reports of the Advisory Committee of the Board of 
Education indicate that in their opinion this feiiture of adaptability to 
change was a very important one, as was the fact that when once the 
Board had paid over its grants it not only need l)e under no anxiety on 
the ground of security but need not further interfere in the administnition 
of the scheme. This was found to be so nearly automatic that all 
details of its working, and even the settlement of future (questions of 
principle, could safely be left to the Universities themselves— a feature 
designed to commend it likewise to the latter bodies, most of whom 
are jealous of State interference. 

270. The facility with which the Universities System adapts itself 
to changes of service is based upon a fundamental prihciple which might 
escape notice if not emphasized. This principle is a frank recognition 
of the view that a pension is, in the strictest sense and not as the 
phrase is sometimes used, deferred pay. In other words, that every 
period of service has earned its quota towards the old age pi-ovision of the 
employee ; and that the contributions set aside for it, when once made, 
must enure for his or her future benefit. This appears to represent the 
considered policy of the Board of Education. Their Advisory Committee, 
in a preliminary outline of a scheme for Univeisities, used the folh»wing 
words : " The sums represented by the accumulated contributions would, 
" subject to regulations to be formulated, be regarded as the property of 
•' the beneficiary, which would be restored to him in the form of a pension 
•' on retirement, or of a lump sum on resignation, or would, in the event 
" of his death before commencement of a pension, be piiyable t«> his 



04 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



SYSTEM RECOMMENDED FOR SECONDARY TEACHERS. 



95 



" personal representatives." The fundamental principle thus laid down was 
subsequently accepted by the institutions concerned and confirmed by the 
Board. In practice it is necessary to provide for many minor contingencies 
that anse, such as the case of determination of service through misconduct, 
and the question a^ to which institution or employer, if any, should 
exercise fiduciary control over the policies in the event of migration. But 
the broad principle is the same as that involved in the Elementary 
Teachers Fund (,ee par. 254), in the affiliation schemes of the Royal 
National Pension Fund for Nurses, and in the recommendation we have 
already made for young nurses {;<ee pars. 104 and 105) viz., that 
any service already rendered has earned for the employee, once for all, 
the full pension contributions already made ; and without the adoption 
of this principle it is difficult to see how the problem of migration 
without penalty, to which {see par. 37) we attach great importance, can 
be dealt with adequately. 

271. As regards the existing staffs the scheme did not attempt to 
deal with them in any compulsory way. The money purchase principle 
necessitates that the cost of every benefit must he counted in advance, 
and the funds did not exist for any comprehensive inclusion of the 
whole staffs. Compulsion, therefore, applied only to future appoint- 
ments, and provision for existing staffs was left to the local l)odies 
Local funds existed in many cases, and the constituent bodies were 
encouraged to apply these, as well as the surplus of the public 
grant (see par. 259) after providing for new appointments, in setting up 
policies for existing officers, unless they saw fit to apply the available 
funds otherwise. 



Pension System recommended for Secondary Teachers. 

272. We revert now to the main part of the Report of the Depart- 
mental Committee on the Superannuation of Teachers (1914). It deals 
with the secondary institutions that furnish the problem for which that 
Committee had to. seek a solution (^6'^ par. 258). It is to be remarked 
that in most cases the governing bodies of such institutions are local 
authorities anxious not to burden the rates, or else committees in chronic 
need of money, and hence the whole enciuiry was made subject to the 
provision by the State of such additional grants a^ would be necessary 
to supplement the teacheis' own contributions. For this reason the 
problem before the Departmental Committee was not exactly similar to 
that which we are considering, but in many respects it was analogous, and 
we think it will be of interest if we quote some extracts from the report 
of the Committee giving the conclusions at which they arrived on the 
chief matter under their consideration. 

273. After a broad survey of all the factors of the problem before 
them, the Departmental Committee formulated in general terms the 
conditions to which a pension system ought to conform as follows :— 



I 



First, it should provide a universal minimum of provision against old 
age, reasonably adequate in its amount. 

Secondly, it should provide for the free passage of teachers from one 
institution to another without any sacrifice of pension rights. 

Thirdly, the pension system should secure that the provision made 
for old age shall be reserved for that purpose : there should lie 
no cash realization on mei*e retirement or change of occupjition. 

Fourthly, the system should provide other alternatives besides the one 
method of protecting old age by means of a deferred annuity. 

274. The Report, then proceeds — 

Main Reconivwidation. — We recommend the establishment, in all the schools 
included in the terms of the second reference to us, of a system of insurance for 
full-time teachei-s similar to that which has been established in the Federated 
Universities, and supported by contributions both from the teachers themselves and 
from their employers ; and we recommend that, separate from and additional to t!»o 
benefits derived from these insurances, there shall be State assistance in the form of 
superannuation and disablement allowances ; the superannuation allowances to he of 
the same amounts and under the same conditions as those granted to Elemeutar\ 
School Teachers under the Elementary School Teachers (Superannuation) Acts ol 
1898 and 1912 ; and the disablement allowances to be at the rate hereinafter set out 
(parajjraph 55"'), but otherwise granted under the conditions applical>le to the 
disablement allowances for elementary school teachers. 

Financial Basis of the Proposals. — It has been pointed out above that the 
adoption of the University superannuation system, which involved contributions by 
the Universities, synchronised with the payment of considerable additional grants to 
those institutions by the Board. We base our recommendation of a somewhat 
similar scheme in the Secondary and other schools on the expectation that additional 
funds will 1)0 placed at their disposal by Government. " What we here 

endeavour to do is to show, upon the assumption that such assistance will be forth- 
coming, a suitable manner in which it may be applied in aid of a superannuation 
system applicable to the schools generally. And we consider, as we have already 
remai'ked, that if a system for general application be not adopted, a large number of 
separate systems will grow up with no relation to one another. 

Compulsory adoption of Insurance Policies recommended. — We recommend 
therefore that when increased grants are available for the maintenance of secondary 
and technical schools, a system of providing for the superannuation of teachers at 
those institutions by means' of insurance policies should be made compulsor)' and 
that the compulsion should be enforced as a condition of grant from the Board of 
Education. The amount of the contribution should be 10 per cent, of the teacher's 
salary, subject, however, to a minimum limit of £10 per annum to the premium 
payable on any teacher's salary, and a maximum limit of £500 to the salary in 
respect of whi«h the teacher or his employer would be compelled to contribute ; 
and the employer should be entitled to deduct from the salary paid to the teacher 
a proportion of it not exceeding 5 per cent. An increment policy should be taken 
out for every st«p of £20 beyond a starting point of £100. Thus, a teacher engaged 
at a commencing salary of £100 would have an insurance policy taken out on 
which the premium would be £10 ; his employer would contribute £5 of this, and 
he would contribute the other £5. When the salary rose to £120, a further policy, 
with a premium of £2 per annum, would be taken out, each party contributing 
£1 towards it ; and so with each successive increment until the salar}' reached 
£500 per annum. Upon the salary passing this point it should be open to the 
teacher to increase his insurances under the scheme further if he wished to do so in 
respect of the excess over £500, and to the employers to bear a part of the cost 
according to any arrangement mutually entered into between them ; but the com- 
pulsion we propose would stop when the salary reached £500. The minimum 
contribution of £10 per annum which we propose would work thus : — for a teacher 
engaged on an initial salary of £80 the employer would still have to take out a policy 
for which the premium would be £10 ; the maximum which the teacher would hie 
required to contribute towards this would be £4 ; but as his salarj' rose so would his 
contribution, until it amounted to half the premium. The Secondary Scliool Teacher 

'■' See par. 277 below. 



90 



«"KVEV OP VARIOUS MKTHOUS OK PROV.Omc PEN„ONa 



>i. 









interest would necessarily 1^1^^''^^,^^^'"' '»^« ^^^^ limits. Jthat thl^r^J 

teac.;::- Jne:::^ ':.r^:: ^1" "-r "•"^- '— •^ - '-« 

«2,500,000. it might have L„ r. 1 l'"^'' "'"'' * '"""'^ '"' »? 

would p^vice g„;, ^ZglZlTL '::"''' *"' ^"•"' * '-'^ 

mutual conization for the purpo e « ^ ^'*'\"'«'"' ^^ g™«ntee « 
fa^e of the anticipate*! ohjectionTth ""'"'"'•''tandh.g this and in 

paid to private Zsn^^neeZZ^ Pn-c.ple of State money being 
placed on record by two rsTn^e^'t T'""" "'"'*"' ^"^ '» «•««' 

Committee made the LgoingZlndT'^r'''' ""j°"'^ "' '"e 
matter of genemi policy with'thTSL of Sit """" ^'^ "^ ^ - 
case of the Univereities SvstPn, .T^ \? Education, as we saw in the 
for anything in the natlSa ITj^'r'""''''"'^ « '«- « Po-«.<e 

m J^Ls'^ef rts ':;ri;Sn''n^ "h"-"''* '*'*'^' •-•»- 

of interest were a scheme on suTuT^- '*'''*'"*• '"'"'*''> *°"W be 

detain us here. It wiir^ "f W^ ?l ^"^ "'""*'^' *•"' ""^^^ "««d not 
to deal with the question of irer""' '^-^^ '">"'' waspreposed 
iattercontingenc;.astheC^mSetrr "' <^-Wement, for which 
type can make no provisionTxc^n,! '" '^''*'" "'*••" ^"■'^""'t'^^ 
surrender value of fhe SyZntZ """'•" """""^^ f""» *« 
the geneml question ofHtTon of ^"""T' «^ *« »>e paid. On 
the full sense the doctrineTl "" "" Committee, adopting in 

laid down two princTples «) S,'^"'""'' ""* '^''''^ W (^e par. 2?o). 

bv the contribuLs i the t^he^ H "?'* '""'"**' "•""'"^ -'••- 
lapse to the employer and /Km ? *"■ ^^ '^°^ °^ "»« ^^P^er should 
hold the policy W the reducid^lT "f ""*' """ ""« «'"P'°>*»- should 
until the attainment of age 6o it C "'f T"'*^ "^ P^' W'»*»"« 
Wment of the premiums on h.'T^ "'^" '° *" ''^■'*»*"'''' '^ ««»«"«« 
Committee proce^ (andJe lo^ T """""' '' '^ ^ ''^'^- ^he 

would seem to have on thelZlfJ^VT^' ''"' '^' '^""^ '««' i* 

"»e case of Hospital nursing staffs) 



h 



SYSTEM RKCOMMKNDED FOR SECONDARY TEACHKRS. 



»7 



(< 
<< 
«( 
(( 

(( 

(( 

*( 



" While tliis should, in our opinion. l)e the general rule, it shouhl 
permit of one exception, viz., women who leave the profession 
in oi-der to be married. There will always be a considerable 
pi-oportion of women teachers who remain in the profession only 
until they marry, and this constant flow of fresh bloo<l is bv u<» 
means a disadvantage to the schools. Upon the whole it is 
justifiable and suitable to make the benefits realisable bv such 
persons at the time of marriage instead of on arriving at the age 
of 60. A woman who claims to receive the benefits might well 
consider whether it is her fixed intention to retire finally from the 
profession, and, in certain cases, might probably find that even s«i it 
would l)e more to her advantage to keep up the pi-emiums : but if 
at the time of marriage it is her settled intention to retii-e from the 
profession she should, on making a declaration to that eftect, l»e 
enal)led to receive the suirender value of her policies." 



277. In the event of <lisablement the Departmental Committee 
reconunended that a special allowance should be made, as in the ca.'^e of 
elementary teachers, but at the smaller rate of £1 for each complete 
ye/ir of service. The Report also recommends that the diiect spptrannu- 
aticm allowance of £1 for each year of service at present i>ayable by the 
State to elementary teachers after attaining age 6.') should in future Ik? 
payable to all secondary teachers in addition to the benefits accruing at 
age 60 under the proposed insurance policies. 

278. It will thus be seen that the suggested disablement allowance 
is merely an early commencement of the small State suj^rannuation 
allowance which is payable to all at age 65, and in which it would mei-ge 
on attainment of that age. It is in this respect analogous to the State 
disablement allowance under the National Insurance x\ct ; and does not 
appear to have been in any way designed to fill the hiatus to which we 
i-eferred in connection with the Universities scheme, and which must exist 
in any scheme l)ased on insurance policies. We shall return to the 
consideration of disablement benefits (see par. 428). Taking the scheme 
as a whole it appears to have been accepted by the teachers concerned. 
A.ccording to recent statements in the public press, deputations to the 
Pi-esident of the Board expressed approval of the Conunittee's proposals, 
but pressed for special considemtion of the claims of the existing stat!'s. 

Scheme recommended for Officers of Reformatory and Industrial Schools. 

279. Since the foregoing account of recent educational pension 
schemes was drafted, there has been published the report of a 
Departmental Committee of the Home Office, settling a scheme for 
officers of Reformatory and Industrial Schools, in pui-suance of section 56 
of the Children Act. This section provided that the managei*s of certified 
schools might establish a superannuation scheme, but the l)enefits could 
not exceed those, whether pension or gratuity, payable under the 
Superannuation (Metropolis) Act, 1866. 
a 



?■' 



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^8 SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 

" This Act," the Committee reported, " provides for the payment of pensions 
" (bearing a fixed proportion to retiring salaries) to the employees of certain public 
•* bodies from public funds ; it does not contemplate the creation of a pension fund 
'' or the payment of contributions by the beneficiaries. Such a pension scheme is 
'• only possible for coi-porate bodies who can depend on a continuous revenue for an 
" mdefinite future. A body of voluntary Managers, whose powers and functions 
I* would come to an end if their school were closed either through the withdrawal of 
I' the Home Office certificate or for any other reason, obviously cannot guarantee to 
" pay to a young man entering their service a pension after the lapse of twenty 
" or thirty years, unless they make provision for such pension from year to year. 
" Any scheme which will be workable for schools under voluntary management 
must provide for setting aside money for pensions year by year, and the amount of 
the pensions so provided must depend (a) on the amount of accumulated 
contributions, which in turn must depend not on the amount of the officer's salary 
on retirement but on the amount of his salary during each year of service, and 
(6) on the methods of investing the annual contributions, the rise or fall of 
securities and the interest earned. It is therefore impossible to devise a scheme 
by which retiring pensions for officers of Reformatory and Industrial Schools shall 
bear a fixed proportion to retiring salaries in the manner contemplated by the 
Superannuation (Metropolis) Act. 

"Further, under the Superannuation (Metropolis) Act existing officers employed 
at the date of the commencement of the Act would receive a retiring pension on 
the same scale as other officers. Under any scheme which we can devise, since 
the pensions must depend on the accumulation of annual contributions, it is 
impracticable to give as good terms to the older existing officers who will be 
retiring m a comparatively few years, as can be given to younger men in respect 
of whom contnbutions can be allowed to accumulate over longer periods. 

" Finally, the Superannuation (Metropolis) Act does not contemplate any 
" contnbutions from the beneficiaries, while under all the schemes suggested for 
" Reformatory and Industrial Schools it has been expected that contributions shall 
" be paid by the officers themselves, and the officers— so far as their opinion can be 
" ascertained— are quite willing to make such contributions." 

280. A scheme had been submitted to the Departmental Committee 
by the Society of School Superintendents, in which it was proposed that 
the managers and beneficiaries shcmld contribute in certain prescribed 
proportions, and that the Treasury should pay whatever further sums 
might be requii-ed. On this the Departmental Committee reported that 
without the Treasury guarantee the scheme would }ye actuarially unsound ; 
and that, in the absence of special legislation, of which there was no 
chance, there is no method of securing a State guarantee for pensions. 
It was impossible to make use for the purpose of the National Debt Office 
or the Post Office, for, though these departuients sell immediate annuities, 
they provide no machinery for deferred annuities. 

" We have considered," the Departmental Committee proceeded, " whether it 
would be desirable to dispense with any guarantee and to set up a special fund 
controlled by representatives of the Managers and officers, from which fund there 
could be purchased for each officer on retirement such an immediate annuity as 
would be provided by the accummulated contributions paid on his behalf. One of 
the main difficulties of such a scheme would he the investment of the money, and 
we inquired of the Public Trustee whether he would be willing to undertake the 
management of such a fund if he were asked. Ho. however, declined to accept 
the responsibility, on the ground that if the investments should suffer serious 
depreciation, and the officers were accordingly unable to obtain the pensions on 
which they were counting, his Office would inevitably be involved in disrepute. 

" The responsibility which the Public Trustee declines would, we think, be too 
heavy for any private trustees who might be appointed on l>ehalf of the Managers 
and officers. However carefully the fund were managed, the risk of depreciation 
of investments would alwavs be present ; actuarial valuation from time to time 
would be necessarj', and the pension assigned to a retiring officer would be 
greater or less according to tlie state of the fund at the last valuation. 

•' Seeing that no State machinery is available and that the risks of a special 
and comparatively small fund managed and invested by private trustees are great 
we recommend that use be made of Insurance Companies. An Insurance 
Company will receive the annual contributions by way of premiums, will invest 
them with the other large funds of the Company and will guarantee an annuity 
m accordance with published tables at a fixed minimum rate at any age that 
may be prescribed. Under such a system the risks are taken by the Company 



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(I 
•I 



SCHEME FOR OFFICERS OF REFORMATORY AND INDUSTKIAL S('H(MHi>. 99 

" and not by the annuitants, and the Company has the whole of its large fun 
" to draw upon to meet any loss resulting from particular investments or particular 
" branches of business. The Certified Schools' Officer will know definitely from 
" the published tables of the Company what is the minimum annuity which his 
" annual contributions will produce, and if the Company is a good one, will have 
•' no fear of getting less. 

" And this advantage can, we believe, be purchased verj' cheaply. As far as we 
• •' can estimate, it appears that the pensioners would get approximately the same 
" benefits for the same contributions from an Insurance Company as they would get 
'• from a successful fund of their own. It is true that some part of the premiums 
" paid to an Insurance Company is absorbed in profit to the Company and expenses 
•* of management, but the profit on deferred annuities is very small and toe expenses 
•• of management in a goo<l Company are probably I'ttle, if at all, greater than the 
" expenses that would be involved in the management of a special fund. The cost 
" of managing a special fund ci*eated by contributions from Reformatory and 
" Industrial Schools would be comparatively large, because the fund would be 
" comparatively small. 

•* A scheme by which pensions are purchased from Insurance Companies has 
" been adopted for the Federated Universities in accordance with a re[>oit of tlie 
" Advisory Committee of the Board of Education, and another schenie of the 
*• same kind for teachers of Secondary and Technical Schools has been reconimeudctl 
" by the majority of a Departmental Committee appointed by the Board of Education 
" in 1912." 



281. The Departmental Committee accordingly recommended that 
a small committee of managers and officers should be ap^iointed to make 
the best terms they could with an insurance company. As death 
benefits were not contemplated l)y the Superannuation (Metropolis) Act. 
1866, it would not l>e pmcticable to offer any option of endowment 
insurances, as in the case of the Federated Universities System ; and as, 
therefore, only one scheme of insurance (viz., a deferi*e<l annuity) was 
required, the Depiirtmental Committee thought it might prove to he best 
to give all the business to one company. In order to provide for legjil 
control over the jwlicies and for freedom of change from one scli(X)l ti> 
another, the Committee proposed that all schools should apixunt the 
Public Trustee to act on their behalf, and that all policy contmcts should 
be made by him. Payments of premiums could be made direct to the 
insurance company, and likewise payments from the comptmy to the 
beneficiaries. 

282. It will be seen that the problem set to the Committee was to 
devise a scheme which should include the whole of the existing staffs. In 
considering the scale of pensions and contributions to he adopted, they 
found it impossil)le, for the retisons above stated, to base the benefits on 
the salary at retirement. They took, therefore, by way of compromise, the 
existing salaries and calculated what percentage of these salaries must be 
contributed in order to produce at 65 an annuity (with return of premiums 
to the officer in case of death or retirement) equal to forty-sixtieths of the 
existing salaries. They considered that a contribution of 8 to 10 per cent, 
should \ye looked for, and should be apportioned as follows : — 

Officer's Share. Managers' Share. Total. 
3 per cent. 5 per cent. 8 per cent. 
6 „ 9 „ 

6 „ H 

6 ,. 10 



For officers below 80 


3 per < 


»» »» 


of 30 and not over 35 


3 „ 


»» >» 


of 35 and not over 40 


'^ „ 


i» »» 


of 40 and over 


4 „ 


g2 







»» 



im 



SURVEY OF VARIOUS MRTHODS OF PROVIDING PENSIONS. 



f 



the 2! nJt .^?P''^'r'"*' (Committee proceeded to give attention to 
undeHo the r"' °'^,'^'"^, '-'--' *^ -^ «0. In the case of those 
Tme, ^: K . r. ' °' contributions would produce the pensions 

" the sake of theXilnlv of tZ «.hTl '^"^^"^.u^"' ^^or their own sakes and 
" longer, but it is not S terSteT^^^ ""^ '''T^^ '^"^ ^^°^*'° "^"<^»^ 

" made for their n.aiitenance On Z othlr h^rr''*? "°^^'' ^"^« P'-^^^o" '« 
'• men who have only contributed for a fl vearsinnn t' * ^^r^^butory scheme 
" same scale as is applicable to th«M.nT ^ cannot expect pensions on the 

•* their service." ^PP"''**'^^ ^"^ *^« >*>"°g«'- ^en who will contriEute throughout 

overlo should^'rl*'" T' '* ""^ 'commended that officers 
celin si K ' ^PP'^-nc-'t^ry froe pensions aocorfing to a 

certain scale. For example, an officer of 40 with 20 yeare service at 
the commencement of the .scheme would roceive. in SiorTthe 
pension provide,! by the scheme, an annuity equa^l to Ttr ce„t of 

„n!h K /v. ^^"^"^^ '*''^"'^' ^y * State contribution -prosumab?v 
for an officer to retire iffpr fto i . • /, ^^^'^^- ^*^ would be optional 

-luced to the s^r u:rjbr: ;l "isit ti- '^""'" •^ 

voluntary retirement befoi-e 60 or oi^eatTZ T' ' """"' °^ 

' ^'"' "For arottP""" "'i^J' '"'"'' " "^ '»"°^' :- 
" free pension ^t'^X^Tet'^ZTV"""'' °' '^e scheme. . sapplementary 
" emoluments in resp4t otla^ v«^ * r**' "^"'- °' *■!. exi»ting*^La^^ 
•; commencement of tZ\Z^\jZr mcl^'Tuf^^ compfeted "2^ ^^ 

;;compio.ea.,e.or.|'.bove40„n'iLrSr^^^ 



SCHEME FOR OFFICERS OF REFORMATORY AND INDUSTRIAL SCHOOLS. lOl 

incapacity were the cause of retirement l)efore 60, the total premiums 
accumulated were to be applied to purchase an immediate annuity, or, if 
small, paid as a lump sum. 

288. The general object of this scheme was to provide for officers 
substantially occupied in training the children. Conse<|uently all part- 
time employees were excluded, as well as secretaries, clerks, domestic 
servants and labourers. In the case of certificated teachers included in 
the State provision for elementary teachers, the new scheme was to be 
i-egarded as supplementary to the State scheme, and contributions were 
to be made only in respect of salary in excess of £120 per annum 
(Women £96). 

289. Accepting these principles, it was calculated that the total 
number of pensionable officers would be 1,668, and the total of the salaries 
and emoluments computable for pensions £155,153. This total was 
distributed as follows :— £ 

Officers below 30 27,871 

„ of 30 and not over 35 21 ,059 

I) M 35 „ „ 40 22,689 

„ aged 40 and over 83,534 

290. On the scheme proposed, the normal annual subscriptions, 
excluding the cost of supplementary free pensions for existing officers 
over 40, would be altogether £14,633, of which the officers would 
contribute £5,603 and the schools £9,030. In addition there would be for 
some years to come the additional cost of providing supplementarv free 
pensions to existing officers over 40. The annual cost of such pensions 
on the scale i)roposed would be approximately : — 

£ 

Annual premiums to provide supplementary free 

pensions for officers between 40 and 60 at 
the commencement of the scheme 
Annual payments by way of pension to officers 
who have attained the iige of 60 at the 
commencement of the scheme 



6,838 



2,648 

N — — — 

£9,486 

The charge for supplementary pensions would, of course, gradually 
decrease and ultimately disappear altogether ; but at the outset the total 
charge falling on the school funds would thus be about £18,500 per annum, 
of which one-half, and possibly more, would be reimbursed to them by the 
Home Office. 

291. It is interesting to note that the Deimrtmental Committee 
arrived at their fundamental conclusions by the logical steps : (i) that the 
pension (a) must depend on the contributions and (b) cannot be correlated 
to the salary; (ii) that the money purchase system must therefore be 
adopted ; (iii) that a responsibility for investing a mutual fund declined by 



^ 



102 



SUKVEV OF VAKIOUS METHODS OK HROVIDINO PENSIONS. 



the Public Trustee woul.I be too I.eavy for privute trustees ; a.ul ,iv) that 

the. that the problem of pensioning the existing sUiffs was solve,! 

i u Nnf ■';'' f 7, ' P""'™' """"^ *'• <''> ''y P'^^'-l'-g «»Pple»-.tary 
fAt^ i 1 h ' r. T' """'"" "-^ *" ■" '■""■«> f""" .State funds, and 

p.em unns of £<»,030 payable by the employees (,ee hist p,ir ) £1 -'Ti 
voul see,„ to be due to the higher ages of the existing"^ m^e™ 'a' d 
lou^ \f'\^''''' ^<"- -PP'-ncntary pensions shows an initial. 

moderate sciile of l,enefits atlopted for the existing stafls. 
£r.t doinJso u '''P"'""'^"*^' ^™"'»"«'« t" i"-f'«te their scheme. 

P.C 7^^^^^^^^^^^^ 



Ir 



The Koyal National Pension Fund for iNurses. 

2»3. In the category of schemes based on the money purelme 
pnncple ahso comes the Royal National Pension Fund for XuSlTT 

Ther-tesof nt ""'"' ''* ^""^ ^^^"'•'"'°« Companies Act 

uncelaLtvTt e/''"'^^""^''^ '" that the principal elements of 
.incertomty m the case are Irnuted to those inherent in all such projects 

future of 1 r'f- "'^ ""''''"^ *''^ ^»'"^ "f '»"« --''' and the 
luture of the rate of interest. The Fund is open to male officen, of 

Hospitals as well as females, but very few men have effected poSr 

m. The Fund at its institution had the advantage of some larue 
dona^ons of money, which were invested as capital, the income and evtn 
part of the capital to be applied from time to time to suppleZnt Ihe 

applied to increase the amount of the pensions payable and in the mst 

ttasT T' "T"""'^ ""^^ ■" ""^ ^-y »-" given to the memC 

Kin,^' T A 'k ''"'"^ *" "' ^y '^' "^^"'''^ °f th« Fund. Mr George 

ff l"'n ; %"k" ""^ ^""^ "'""«'' '^ '^''^''d - - 'vitness. that he 7^ 
of longevity of those nurees who have already entered on the l Z 
was unexpectedly hieh and that it • ^^'^ "" *''«"^ pensions 

. ^, y^'-'^'y '"gn, ana that it was in consequence verv rlniihtf.,1 



IIOYAL NATIONAL TENSION FUND FOR NUKSES. 



103 



295. As we have already seen, the Royal National Pension Fund 
has excellent machinery for federating with any Hospital which will 
interest itself in providing pensions on the money puixhase system 
for its nurses, and it has also a separate fund out of which assistance 
can lie given in suital)le cases to members who ai*e unable to keep up 
their jwyments during sickness, etc. We have no evidence that this 
special fund is lai-ge enough to operate to any great extent, but it is an 
excellent feature in principle. The difficulty of meeting ca^es of sickness, 
even when it involves temiK)rary loss of earnings, but more particularly 
when it necessitates an early retirement, is, as we have seen, a gi*eat 
disadvantage of the method of providing pensions on the money purchase 
plan. For to secure a fixed benefit it is obviously necessary that the 
stated contribution be duly paid. 

296. It will be seen that the Royal National Pension Fund is not a 
pension fund in the technical sense, but a society granting annuities in 
return for properly apportioned premiums ; and, as might be supposed 
from what has l>een stated, the actual contract terms oftei-ed by the 
Fund are com{)arable with those of other societies. It may be of interest 
to show here, for one or two selected ages, the actual contributions 
for a pension of £10 per annum on a female life, as quoted (i) in the 
prospectus of the Royal National Pension Fund and (ii) by two insui-ance 
companies included in the Federated Universities System. 

Annual Premium for a Pension of £10 per annum on a Female Life 
(tite premiums beimj returnable with interest in the erent of death 
before the Pension age). 





Pension to commence 


r 

at 55. ^ 

1 

Commercial ' 

Union 

Assurance 

Comimny 

Limited.! 


Pension to commence at 60. 


Age 

at 

Entry. 


Royal National 

Pension Fund 

for Nurses.* 


Legal & General 

Assurance 

Society. 1 


Royal National Legal & General 
Pension Fund Assurance 
foi Nurses.* Society.! 

1 


Commerciid 
Unkm 

Assnrance 
Compjiuy 
Limited.t 




£ 8. d. 


£ s. d. 


£ s. d. 


£ s. d. 


£ s. d. 


£ s. d. 


21' 


2 14 


2 7 


2 7 


1 17 


1 13 


1 12 


.30 


4 5 


3 14 


3 14 4 


2 17 


2 9 5 


2 8 7 


40 


8 7 


7 5 


7 5 9 


,500 

1 


4 7 4 


4 6 



* In the case of the Royal National Pension Fund the premiums can be paid monthly 
and the benefit may be increased out of profits as explained above. 

f In the case of the two insurance companies there is the added security of the 
shareholders' capital. 



\ 



297. It will be noticed that this Table is based on the plan of 
returning all the premiums that may have been paid in the event of death 
before entering on the pension. These are the only rates published in the 
prospectus of the Royal National Fund, and although the Fund is 



^ 



104 



SIJUVKV ,)K VAKIOirs MKTIloDS OF PKOVIOIN,; PENSIONS. 



..."•ses and .lit "" «/«■""' v.ews a^ to what is .Icsirul.le for 

quoM ii. theSo' t'^r' !";"T '"'"""•^■^ '^'"■-" *•>« -'^'^-'^ 

lurge.- Luef^^l Z^^^ """"""' '="'"'*'""•'' «"• g"'« «t 'be o„,.set 
Fund. W „ irSt """"' "' ^'"""■""' *'""' '"« «»>-' National 

"loSt: at;: \-r ^-^^ A tXiLt 

from profits and •'•7nern,.„t v.. T " "'■""' **'" P«'- cent. 

which is added V'sT;'," "'"""'"' '" *'"'•''■*" '•^'- "'""""' ^ 
declared, and iK-in-^'liCf 7.i ^"^ '""'• '*l'"^'''^"«"g ''o""se.s almdy 

ext..„eo;.s dollar rtJTIsI'o/riaT^T '"'" ' '^" ''"'■ ''^'^ 
of £42.6,« was allotted b/wa^^Tiltrl "'"''; ^'■"'■""'■'• P'"«' 
averaginj; about '!■ n^r n^J ■ lu ^™'^^- """ ■•^suited in increases 

Adding the.se pe^en^.: o t 1 „T^^^^^ f "''^ 'f ^"'"- -"""•- 
-em that existing anm.itanis 2 ely an' addhT r"' k- "°""' 
15 per cent, to the contmct benefits • wMe Z f. """"""'"^ ''''" 

avenge addition, vaiying a gl 'dea Ih t" """""^'"-^ ^ave an 
Hke 2 or 3 per cent. eTtnr to l^.k forwL 1 to^.J""' • f ""■'"""^ 
.^eadyseen. a somewhat ^n^r^T^ T^^^^^t^Z 

the l^Lt^Jtls'ttXl''" ''"''^ '" '""'*''"'^" ^« -> -'"<« 
it seems that the P^mtm' ^^d tHr rH' ^ " ^**"""'^' 
annuities at 55 are higher i.r, . ! ^"' ^''""""' ''"'"l f"'' 

and the return for this hlh J P"" '^*^"- *'""" theothen.: 

-«ht in the i;'4e "'XSTl: m 7'""-;- ™- «- 

.^tr ir ^ """" ^^ '^^ -X vsr of ..r s^s 

ex^Hnan":, Ee 'n1rCo„r a^S^ ^T. 7 "" '-"^ ^ 

the first consr.:Z The VuTr^'lr'T'/''' •"'" '"••'^'« -""V 

ext,«neous support an.l of la"e do T 'r^ ''^ '"'"'«' "' '""•'h 
XL J '*^® donations of moiif^v ir -.^u i. 

these advantages, the Fund has bai^ly eompetld S' J' ■ "' *" 
companies in the past and «.Bm» i ."""l^ten with the msunince 

the explanation mCt' i"l~ i^oneof t^: '"r" '" '"^ '"*-• 

ugni' in one of two directions. Either 



UOYAL NATIONAL PENSION FUND FOK NURSES. 



io.> 



insurance companie give too much, or a mutual fund, through the exercise 
of legitimate caution or for some other reason, cannot give as good vaUie 
as the companies. 

:)01. The foregoing analysis, like the conclusions arrived at in 
paragraphs 261 and 266, does not supiiort the contention of the Hospital 
Officers that the machinery of insurance companies is necessarily 
expensive. It would be an interesting speculation to enquire what 
would have been the position of the Royal National Fund to day if it had 
Ciii-efully nursed its own funds, reserving them to supply the si^ccial needs 
caused by sickness and disablement, and had transferred the actual annuity 
risks to insurance companies : but it would scarcely come within the 
pi-oper scope of our enquiry to pursue this question. 

302. As regards the future, however, the longevity of the pensioners 
(sfe par. 294), confirmed as it is by the long(3vity of the male p^nisioners in 
the liailwav Clearing Fund (see i«ir. 238), and the general considerations 
and tendencies we shall discuss later on (^ee piirs. 393 to 397), cannot l»e 
disregarded. The latter point to increasing dilliculty in comi>cting with 
strong insurance companies ; and the existing contingency of increasing 
the rates of premium (see par. 394) may quite possil»ly in the futui-e cause 
the Fund to reconsider the desirability of continuing to grant annmties at 
its own risk. Whatever may happen, however, to this side of the Fund^> 
aetivities, we cannot help thinking that, where there is such a numerous 
and unorganized body of workers as is found in the trained nurses of the 
nation, and more particulariy those who have gone into private nursing, 
there will always be scope for the work of such an institution as the 
Koval National Pension Fund. We ourselves have already indicated 
(see par. 106) a direction in which this Fund and the new a>llege of 
Nursing, in the event of the recommendations we have made regarding 
pensions for young nurses assuming pi-actical shape, might render a very 
valuable service to the body as a whole-the kind of service, in fact, that 
could only be rendered by organizations approaching the task with 
sympathy and understanding of the needs of the case. 



New South W^ales proposed Superannuation Fund. 

303. This scheme, though published in 1912, at present i-emains only 
a project ; but it has been carefully elaborated and calls for brief notice. 
A Departmental Committee was appointed to consider the whole question 
of superannuation in the public service, including any existing schemes 
and extending the principle to include all Municipal and Shii-e employees. 
General schemes of social insurance were in the air, and the Committee 
was to devise a type of superannuation that would lend itself to extension 
to the other classes of the community. 

304. A scheme that had been submitted by the Public Service 
Association was disapproved, mainly because it projiosed a large initial 



106 



Sl'RVEV OK VAK.Ol:S METHOD OK PROVUIN,-. PENS.ONS. 



i; 



payment to he made hy the Staf». hnf oi i 

tl.e co„t,.,l,„rio„.s slu„.l,l be distinctly relLuoi. I 'T 

•amount of ijcmiou rights in prosneet ^ ' ''"J^""'' "P"" "'« 

'" "Po.. the an>ount of salary " X *.. ^. ' '" ""■"' ''••""'*' ''"P«"<' 

more „«„al ,„etho,l of T'lZ;,. ' •^""'""""^ •^«P«''''-''' f-^'" "'« 

boldly attacke.1 th pro'£ ? ' " T"' """" '" "'« -•'"•^- «"" 

money pnrehase principle. ThrwoS T . ^ ''"'"""""'^ '^>' *« 
of that principle' In' the le „f L Tf ^ " ""''^' ''^»"'«*«°» 
(*..par. 282) a similar sort oT^L V ^^f"™*""-/ Schools Scheme 

the benefits aimed arw'rl alSvT.""/'°P'"'' '"' '" "'«' '»- 
contributive capacity. "^'"""^''^ '^d''««l to the pmctical limits of 

.nsirroir-l^l.:;^^^ Thns « 

r Lr i: ;rr oir'-.^ ^^^^^^^^ 

1« is to receive sTs ^ a„nf l^TZ""' ""'' "'^'' •""''^ "»d«' 
before or after the r^LTZT n "'' '"''"^'•''* '^«'"' »«""• 

age 60, the emp.o^r 2 tntribul'r*"? "k^ ''^'"'^' '^'"- 
contributions a..Vl. shared e^^^by I sTte " ^h "'"t'' ''''* 
are to be paid into a fund which ir/n)! ^' °'''«'-«'nployer. and 

by a Beam of three memte^ of wh """"* "' ""' '^*' "' '""^ ^'^'^ 
is no reference in theZorlJof t^ °"' ^"xf' "* *" '«""*'7- ^here 
of the benefits, nor do IheTlmitt^'TK'^ ^"' *" '"^ ^'"'^ «^"""«« 
of security. iW do not even S V "'P"" '^'■*'- '° ""' '»»*'«■• 
on the siJe eitheLf ^^fif H t T'''^ "/ '"''"^ ™"''«-' 
actuaries. There can, however rii tie d! K T ^' ""'' "^« ^^ ""» 
escape responsibility f;r the solved' of J M ^' '^^ «t«te would not 
of Parliament. ^ "' "" ''*'^'*'« ^"''eme set up by Act 

Sehem? it'l;lt"^iS^^^c'■rH"'"' '" '"^ '^"'^'"^'"'^ " 
10 per cent, of the X^ u/k , Z "^'''''"'' "^'''^ ""^ ^'^'^ »» 

pension being assured S tie fh ?"' ?"'"'= '"^'^ '"'"^'»«'"« "f 
In the New South W«T ! '*''""-' '"'"^"'•'>t« amount to £25 

fundamental conceptioTi: S^strs^^^^^^^ ""'"^ «'^«" ^» '^ 

of pension of £26 per ann„r ' if k ^ '"''""' °' " •=*""?'''»« """if 
scheme then aims at^LtuW f '" '^' "■'''°"' ^'^^ = »»d '^e 

P-ide a pension oj Z^^loV^Z' T:^' "1 ""'^"''''^ "« '^"^ 
contribution is to be for two „nL or £5^' „/ • T" ^*" ""'"■"»"» 
no compulsion as to any incrll^f^r Lrrit "'" '^ ^ "^ 
necessary contributions is thus arrived TLT '""°'^' °' *' 

the preposS it;t:Vs7;ia;tv:Sa7 '" "'^"'"""^ '"^ ^-* »' 

statistics of the nnhlin ™vestigation was made into the vital 

1:^,«^5menand3Swonr" T'"'"''- ^-o--' the case of 

^,226 women m acfve service, as well as 5,368 men and 



NEW SOUTH WAIXS PROPOSEH SUPERASNOATIOS KUND. 



107 



2,970 women who ha<l left the service. These statistics did not, however, 
throw the desired light on the question of early retirements due to 
breiikdown of health. For this purpose recoui-se was hail to existing 
records of the New South Wales Government l{ailways and Tramways over 
a periotl of 16 years. The new statistics were used chiefly to determine 
the rates of " waste," and the values of the widows and orpluins benefits. 
Combining these with the most suitable Tables available for rates of 
mortality among officers and among pensioners, the ax:tuaries calculatwl 
the rates of contribution for .salaried .staffs and weekly wage staffs 
separately ; but the different forces affecting the statts tended to neutralize 
one another, and in the end similar rates were quoted for all. Females, 
of course, are seimrate, and pay smaller contributions, as there are no 
widows and orphans benefits to be provided. 

308. It being interesting to see the cost of each tenefit sepjirately, 
as given by the actuaries, we have extracted the following imrticulars for 
certain ages. The rates quoted are for half-monthly payments, and for 
the contributor's share only. We have added a column showing the 
whole cost as an annual premium : — 

MALE.S : Cost of each Double Unit of £52 per Annum at A<iE 60. 

[Excluding Orphans Benefit.*] 



Age. 


Normal Pension. 


1 

Invalid Pension. 


Withdrawal 

Benefit 

(Refund of 

Member's 

Contribution). 


Total 
Half-Cost 

Half- 
Monthly. 


Equivalent 

Toial 

Annual 


Member. 


Widow. 


Member. 


Widow. 


I^remium. 


90 


B. d. 
1 1 


s. d. 
10 


1 
8. d. ! s. d. 
6 2 


d. 
3 


£ s. d. 
2 10 


£ s. d. 
6 16 


80 


2 1 


1 8 


10 3 


2 


5 2 


12 8 


40 


4 3 


2 7 


1 9 


6 


1 


9 2 


^2 


60 


11 9 


4 6 


4 


1 


• • » 


113 


51 



Females: Cost of each Double Unit of £52 per Annum. 

(i.) Retirement at Age 60. 



Age. 


Normal 
Pension. 


1 

Invalid 
Pension. 


Withdrawal 

Benefit (Refund of 

Member's Contri- ; 

bution). 


Total 

Half-Cost 

Half -Monthly. 


Equivalent 

ToUl Annual 

Premium. 




8. d. 


8. d. 


d. 


8. d. 


£ S. d. 


20 


10 


5 


3 


1 6 


3 12 


30 


2 1 


11 


2 


3 2 


7 12 


40 


4 7 


1 10 


1 


6 6 


15 12 


50 


12 10 


4 


• • • 


16 10 


40 8 






* The total annual cost of this benefit increases with the age from 168. Od. up to 
£2 88. It is not included here, as it is payable once only— i.e., in respect of the first £yl. 



108 



I 



r 



SURVEY OF VARIOUS METHODS OF PROVIDINc; PENSIONS. 

("*•) Retirement at Age 55. 



SCHEME SUBMITTED BY MR. TINNER. 



109 



Age. 



Noniml 
Pension. 



Invalid 
PeuKJon. 



Withdrawal 
Benefit (Reftuid of I 
Member's Ck>utri- 
bution). 



Total 
Half-Cost 
Half-Monthlj. 



20 
30 
40 
50 



£ s. (1. 


8. d. 


2 


2 


4 10 


6 


11 9 


11 


2 7 7 


2 1 



Equivalent 

Total Annua] 

Premium. 



a. 

5 

4 
2 
1 



£ 8. d. 


£ 8. 


d. 


2 7 


6 4 





5 8 


13 12 





12 10 


30 16 





2 9 9 


119 8 







nf fKo ""^ ^'^^^"^ P^^^ ™en rise, the L'rowinc amount 

proposed provision for tlie existing sbiff. Tho ^^ \ ^ ' ' ^''^ 

increases lip to £156 ner «nnnr,. fk ii ^"® ^^*^' «* <^ne optional 

estimate tL , . ^' """"""^ they could not forecast, nor could they 
estimate the cost m i-espect of future entrant** TK. .• ^ 

to be spread over 40 oV 50 years. '^ '' apparently 

311. All existing employees under 30, and all future Pntr«nf. a 
that age, are to come nnH*»r f L <• n • • entrants under 

^ , e to come under the full provisions of the Bill. The former 



consisted of 3,448 men and 1,608 women and the annual cost for these 
was estimated at £'25,000, increasing, of course, in the future with the 
increase of total salaries. 

812. The scheme is an interesting project for a national fund in 
which family provision plays an important part and in which the full assured 
pensions become immediately available in the event of breakdown, the 
cost of this being separately calculated but included in the general 
contribution. Its other distinguishing feature, that of basing the 
ultimate pension on a prescribed scale ami leaving the percentage of 
contribution payable to vary in almost every individual case, carries wnth 
it obvious inconveniences. Logical as it may be from the point of view of 
supplying family needs and the endowment of motherhood, objects which 
are fi-eely discussed and frankly aimed at in our democratic dominions 
ovei-seas, it opens an additional field of controversy and clearly «dls for 
much further consideration liefore the principle on which it rests could 
meet with general acceptance. It will be seen that actuarial assumptions 
of all sorts enter into the scheme, and the element of security would 
obviously be lacking in the absence of a State guarantee. Finally, as 
regards the existing staffs the l)enefits are strictly limited ; and even then 
the cost is found to be so great that it is proposed to pay for them by a 
system of postponed State contributions, which is a good deal removed 
from the principle of making financial provision in advance. 

Scheme submitted by Mr. T. Tinner, F.I.A. 

313. Another interesting application of the money pm-chase principle 
is found in a proposed scheme submitted to us by Mr. Thomas Tinner, F.I. A.. 
of the London County Council, who was good enough to attend as a 
witness and explain his proposals personally. His own detailed description 
of the scheme will be found in Appendix VIII. 

314. The foundation of the scheme is column 2 of Mr. Tinners 
Table III, which shows, for each age attained, and for each contribution of 
£1, the amount of pension which can l)e granted at age 65 or on eariier 
retirement through incapacitation. It is a distinguishing feature of this 
proposal that the pensions, like those proposed in the New South Wales 
scheme, should become payable, though not for the full ultimate amount, 
in the event of disablement. Mr. Tinner attached gi-eat imix)rtance to 
this feature ; and his evidence as to its desirability is valuable, his 
experience in dealing with staff questions at the London County Council 
being very considerable. 

315. A mutual fund was to be set up, and, assuming that employer 
and employee would contribute in equal proportions, the method of 
calculation provided for the return of the member's own contributions in 
the event of death while in the service. No profit from withdrawals 
entered into the calculations. Even if the meml>er's own contributions 



I I 



no 



«'RVKV OF VARIOUS METHODS OF PROVmiNr. PENSIONS. 



the f„te...st, tot; llST '""!*"•'»'--• «"" the whole of 
benefits. " ""^" ^""^ cont.ngencies or for incasing the 

and Z^2:z;:s:^:z^ "- .•^^- ^^ --"^^ 

from the experience of existing TunlTTTuT '"«'P»'>'ty. deduced 

He assumed a future net 2!,fttt I '3 '" "^ ""'''' '^"°'^'^''^«- 

of tax, and he made no aIIow«nl T * P^*" ''^"'•' '''^'" deduction 

that any Table used at fii^ It t^ Tr" "^ """"^'^ P°'-*« ""t 

fund develops its own chTr^tT • ^ ^'^'^ "' '""*«''^«' »^"«e every 

by experienJ^. L the ^^^1 "T' "f * "^ """ ""'^ •* «--taine^ 

heing "ncomphcatedwr widow, f "f "" ^"'''^ "'^I-"--' ""d 

scheme in pi.„ee to tl NeTL:; ^T. '" '*"'''^' ^' ^'^^ "'« 

investigation and comparison ' """ "" ' •*«" '"«'• farther 

t 

317. To illustrate the \vnrVin,» ^f i. 
constructed two scales of hvir ? T^ * '^''•""«- ^r. Tinner 
Appendix Vnr TaWe nr..nH r "*'*"'* ^'^^y ""^ «ct out in 

Of .0 p.r cent, of't 1^ ru^p^JJ: r" '"" " --'^''"«- 
to sixtieths of the avenge salaiy ' KseTr T '"' '''"'"'^"' 
age 35 and themtouts. For irlier tItZt "f members entering at 

better ; for later ent^nts not quitTalort '"""" """''' '" 

It will, however, be more conve^!nT v . P"'"'^'^' »' <'0"'pari.son 

Premiums to the typ.il scZ of / "! T'f **■"• '"'""''' T»»"e of 

which we have alre.d^ Z^tZ.L " oT "'"'" ^''' ""^^"'^^ ^) 

of t^'unl^stn^rir^^^^^^^^^ ?:r*'^ '•«*'^- *"« --ts 

weweremetwitluhcd?£lvl, J''" t"^" ^"^ P"--'^ 263 to 26«) 
the contributions, did not I™ t ! ! T' "'.*' "^P*''"^« •*"««*.,, ,-.. 
as rega.]s the Unive:!^^ nd'SrT''"""- ""^ •=""' "—• 
based on the money pu«=hase nrinll '''" '*''*'"''' *'""' ^eing 

for exactly similar contrrutbnsllZ\TT ''"' '^"^'"■'' "•''"'"^wf 
strictly compamble. ' "'"'""«'' ""^ '"^-^fits them.selves are not 

act."LT/d cILrbt":''*'- ""^ '• ^- ^"""'«- *-IA.. an 
attended as a Witney" gveJS"" "' *'' ''"'^^-^'"^^ -''-«• 
system from the in..uran.^ compalw :V' m *'' ""'"''""^ »' ^^at 
attention to option 9 of the Un3.' , .'^'■- ^^^'"'' "^'"^ our 

contributions in the event of^^Z;: tSr^t T''"*" f "''"^"•^ " 
those proposed by Mr Tinner • W. * ? somewhat similar to 



SCHEME SUBMITTED BY MR. TINNER. 



Ill 



being 10 per cent, of the salaries, the following Table shows the 
estimated pensions obtainable at ages 60 and Qo under the respective 
schemes : — 



Particulars of Type Cases. 



Amount of Pension commencing Amount of Pension commencing 
at GO. at 6.^- 



No. 



I. 

II. 

III. 



Final 
Salary. 



Average 

Salary 

to age 60. 



F.S.S.U. I 

Deferred | Mr. Tinner's 



Annuity 
(with return). * 



£ 

62o 

425 
325 



£ 

447 

257 

208 



£ 

236 

157 
128 



Scheme.! 



F.S.S.U. 

Deferred Mr. Tinner's 

Annuity Scheme, 

(with return).* 



£ 

250 

169 
136 



£ 

362 

242 
196 



£ 

355 

239 
193 



320. By way of considering the general adequacy of the scale ut 
pensions thus provided under money purchase plans, it will be instructive 
to refer to the Table in paragmph 263. It will l>e seen that, as i-egaitls 
the type cases, which are all based on young ages at entry, these 
pensions compare very favourably with those suggested in the Hospital 
(3fficers scheme, and based on the avemge sidary method, so far as 
regards pensions maturing at age 65. For retirements at age 60 they 
ai-e not quite so good ; at 61 they would probably be about the same 
in amount. 

321. Reverting to the more immediate object of the comparison 
made in the last Table, it is seen that the annuities definitely pui-chasi\ble 
under the Universities scheme are in each case very similar to Mr. Tinner s, 
and being based on the money purchase principle they follow the 
general characteristics of his. It Ixjing, as we have said, a special feature 
of Mr. Tinner's scheme to provide satisfactory allowances in the event of a 
breakdown of health, whereas under the more usual applications of the 
money purcliase principle only the actual contributions piiid in each 
case (with or without interest) are available in this event, it is not 
pos.sible to pursue an exact financial comparison between the systems 
to cover the various contingencies of withdrawal from the service 
or death or disablement while in the service. We have, however, iu 
the following Table, set out the respective aotual l>enefits that would 
be payable in those contingencies under each plan. In this case we 
deal only with pensions calculated to begin at 65, as first proposed by 
Mr. Tinner : — 



* This option is based on the rates for Deferred Annuities (with return of premiums 
and 3 per cent, interest in the event of death or discontinuance) of the Commercial Union 
Assurance Company, already quoted by us in paragraph 296. We might also have includetl 
in the Table the amounts of* similar pensions which could lie secured from the Royal National 
Fund for Nurses according to the rates likewise quoted in paragraph 296 ; but this seems 
unnecessary, as the rates of the Royal National Fund for annuities at 60 are in each case 
about l/6th greater than those of the Commercial Union Company, and the resultant 
pensions would thus be about l/7th less, disregarding bonuses. 

t Mr. Tinner, in an addendum to Appendix VIII, has given the results under his 
method for age 60. 



112 



S.MIVEY OF VARIOUS METHODS OK I'KOVIDING PENSIONS. 



ii 



'l! 



i'.S.S.lT. Deferred Annuity. 



Mr. Tinner's Scheme. 



Type ' ^^ATH, Withdrawal or 

Ca«e ' I>I8ABLKMK.NT. 



No. 



Lump sum returnable 
at age 



I>KATH OR WlTHDRAWAr, 

Lump sum roturuablo 
at age 



DlHABLKMEKT. 

Annual Pension commencing 
at age 




Jield Of oi por cent, intcmst an.l no expenses- wl.ei-eas tht 

Assmmng tl .,t Mr. f.nners e.stnnate8 were to be terne.mt in piucUce the 
prospect ot having ....oh pe„.sio„s in the event of a breakdownTf S h 
IS one that must anneal <!trn..„lv t„ m • i ,, ""^f ''"•'"''' «' health 

n.a„y i.u.ivi.iual c^^ t^^ i t We 1 l^t '•""" "'""" '"^ 
t..e U„ivei.itie.s p,.„ ...... .^^ I^f j;^^:^ ,'""S;7 -'- 

Imnd, the complete i-ecognition of the principle of defermi 21 wS 

paj . lh,.s point we must reserve for further discussion. 

323. The two plans of applying the money purchase nrincinle fl..,. 
brought into comp.;.rison differ not only as i.gar5/the pix, pEv^' n ^ J 
and the genera principles underlying them, l.i.t also in the Z of securit^ 

the workin! o.t ?1*'V"""'"'" P'"'^='''^«'"y tentative and subject to 
ncident of'ris ^hJ "'"" "' * ""'""' '""'' "»>"« '" '-o.is 
wort"/, J rt;..enrLt2^ '^•^"'' ^'*- -"-<»• 

to say positive,; .0 or ;';r ah^vt"- -h .f tt tr"X7r 

matter purely from the financial point of view and iJepe Xn I tf he 

:rs;rirt:t:t.""" " '-- -— "- uLIS; 

...atest difficulty to be confronted in the inaiignration of any silch LLIU 



<__ 



SCHEMK SUHMITTEI) HY MK. I INNKK. 



11:J 



As he says, *' it is clearly impiviclic.able to provide l>y means of siu-h 
" a fund for those who are i-oiind about the retiring age." We regard 
it, however, as a recommendation of the money purchase principle, 
on which the plan is fundamentally based, that this fact .should 
thus l)e clearly niised at the outset as a distinct problem, and (as 
we have indicated in pars. 177 and 19^) should not he comliined with 
the different question of providing entirely in advance in respect of 
future service. To the problem of the existing staffs we shall return 
later on as being a separate question. 

• 

325. In general conception Mr. Tinner's scheme ranges itself witli 
the Elementary Teachers Deferred Annuity Fund and the Royal Xati«>nal 
Pension Fund for Nui*ses as a mutual fund for annuities ba.sed on the monev 
purchase principle. Like those funds it is subject to some, lait iKit all, of 
the elements ofri.sk we set out in {mragraphs 127 and 24.') as applicable to 
mutual funds based on the salary pereentage principle. In [mrticular, it 
eliminates the uncertiunties as to the ages at retirement and amounts of 
pension which, as we have seen, have proved fiital to the solvency c>f 
so many of the existing superannuation funds ; and the princi}>al 
difficulties remaining to be guarded again.st in a fund of this ty|ie 
would Ikj (i) the risk of los.ses by depreciation of investments, (ii) the 
possibility of a fall in the future rate of interest below the Vth per cent, 
anticipated, (iii) an undue proportion of disablement cases calling for early 
pensions, and (iv) an improvement in the longevity of the pensioners, 
beyond that provided for in the Tables. 

326 The la.st two questions are perhaps more important than the 
first two. As regards that of pensioners' longevity the experience of the 
Railway Clearing Fund and the evidence of Mr. George King. F.I.A.. 
as to the Royal National Fund for Nurses, have been quoted already 
{see par. 302). We were, indeed, informed by Mr. King that he 
had been alive to this point from the outset of the Fund, and had 
in consequence always aimed at providing sufficient money, both in his 
valuation reserve and in the contributions payal)le, to enal>le all risks 
to be passed off and reassured with strong insurance conqiiinies, should 
such a course at any time seem advi.sal>le. Mr. King's caution in this 
respect, since justified by the event, is seen reflected in the Table in 
paragraph 296, showing the rates quoted l)y the Royal Nati<»nal Fund to 
be less favourable than those quoted by leading insurance companies. To 
this question of the rate of mortality among pensioners we shall return. 

327. As regards the question of early retirements, that is a feature 
which distinguishes Mr. Tinner's scheme from most other examples of the 
money purchase plan, though it appears in the proposed New South 
Wales scheme. In itself an attractive feature of the scheme, it intnxluces 
undoubted difficulties, from the administmtive point of view, of a kind we 
have already mentioned in pfiragmph 245. The experience of the Royal 
National Fund for Nurses proves that a nuitual fund on the money purchase 
principle is feasible for a loosely aggregated body of persons or institutions 

H 



114 



SURVEY OF VARIOUS METHODS OF PROVIDING PENSIONS. 



(i) with great caution under the best actuarial advice, (ii) with a certain 
amount of financial and other help, and (iii) with every l>enefit strictly 
defined. But we cannot hear of any similar fund, other than the Railway 
Clearing System Superannuation Fund (see par. 229 et seq.), which has 
attempted to apply the problem of early retirements to a diversified body 
of institutions like the London Hospitals. It will be seen that Mr. Tinner's 
scheme raises several important questions of principle and practice calling 
for further and separate consideration before a final judgment can be 
passed on it. 



End r»F PART II. 



PJS.RT III. 



DISCUSSION OF THE FUNDAMENTAL QUESTIONS 
INVOLVED IN ANY GENERAL SCHEME OF PENSIONS 
FOR HOSPITAL OFFICERS AND STAFFS AS ILLUSTRATED 
BY THE FOREGOING SURVEY. GENERAL CONCLUSIONS 
AND DISCUSSIONS OF THE METHODS OF GIVlNi; 
EFFECT TO THEM. REJECTION OF MUTUAL SCHEMES 
AND FINAL RECOMMENDATION OF INSURANCE 
METHOD, WITH SEIWRATE PROVISION FOR DISABLE- 
MENT. 



328. In making the foregoing survey of the general field we have, 
perhaps, travelled somewhat far. The difficulty has l^een to i*estrict it. 
Many schemes have not been referred to, but we think our i-eview 
has l)een sufficiently comprehensive to indicate and illustnite the 
significance of every important point of principle that can arise in the 
working of a pension scheme. Some such review was necessary to 
enable us, by the method of comparison, to test the qualities and 
defects of such particular schemes as have been more speeifie^*illy 
under consideration. It will also help us now, by a process of suggestion 
and elimination, to arrive at some general conclusions as to the pni))er 
way of meeting the conditions we have already laid down (.<<r pjir. ll.> 
et aeq.). We will first take the controversial but fundamental (juestions 
of principle which were raised in paragraph 119. 



(a) Should the Liability of Hospitals for Pensions be provided for 

in advance ? 



329. Our survey has furnished us with many facts bearing on this 
question. A reference to it (s^ee, inter alia, pars. 12, 149, 160, 180, 190, 
205, and 224) shows to what serious proportions acci-uing liabilities for 
pensions may grow when unprovided for in advance. And if this fact has 
called for action in the case of governments, municipal bodies and great 
railway companies, it seems clear that charitable institutions with no 
assured sources of future income, as are the majority of the Hospitals of 
London, are specially unsuited, both in legal constitution and in financial 
position, for the assumption of liabilities of that kind. 

330. It is, no doubt, a question of general interest to consider 
the extent to which any generation may be said to benefit by, and 
ought to help to pay for, the labours of the past. Considerations of 
that nature, so far as manual workers are concerned, though imperfectly 

H 2 



:H 



i 



116 FUNDAMENTAL QUESTIONS INVOLVED IN ANY GENERAL SCHEME. 

recognized, seem to have run through all the ancient Poor Law 
legislation, and undoul)tedly contributed to the recent grant of universal 
old age pensions without any sort of financial provision l>efoi-ehand. A 
rational argument may he advanced that the old age provision of a man 
who, for instance, has founded a large business which will go on producing 
considei-able profits long after his working time should properly l>e made 
a chai-ge on those profits ; and no doubt instances of this sort might 
be multiplied indefinitely. For these reasons we should hesitate to 
suggest anything like a universal principle in this matter ; but we have 
no hesitation in saying that a system which leaves large accruing liabilities 
to be met in the future is one which ought not to be followed by the 
voluntary Hospitals of London. In their case, though many of their 
officers, male and female, are doing work which will be reflected in 
great benefits to a future generation, yet it is work which, apart from 
improvements in life and health, does not produce future profit for the 
Hospitals m the industrial sense. Lideed, an energetic principal officer 
may leave his Hospital, and probably genemlly does, with increased 
expenditure to be provided for. The work would seem to be work that 
should be paid for entirely, including the employer's contribution to old 
age provision, as and when the services are rendered. 

:531. The question whether this should l)e effected in practice by 
contributing a pei-centage of the salary, a.s and when imid, or whether an 
endeavour should be made to estimate the - equivalent annual chame" 
which should be set aside by the employer, may l.e regarded as com- 
^mtively a detail. But we have seen, in the case of the Metropolitan 
Borough Schemes and of the New Zealand Funds, that difficulties arise 
in connection with the latter plan as to the proper i>eriod over which the 
ehaiKe should be spread ; while the Council of the Institute of Actuaries 
when asked to advise Pariiament as to the Borough Schemes, said that 
the employer's contribution should be calculate<l at such percentage of 
the salanes payable as would ensure the solvency of the Funds. 

332. The London County Council (see par. 190) decided to 
discharge its accumulated pension liabilities by an equal charge spread 
over 50 years. Much of the Council's liability, due to existing or • 
impending pen.sions, was inherited from its predeces-sors, and such 
pensions would have a first claim on the equal chaise. The i-emainder 
of the Council's liability had arisen since the foundation of its own 
Superannuation Funds, chiefly through an insufficient scale of contributions 
in respect of meml>ers of the existing staff". In regard to this part of 
the liability, it is not easy to see a logical basis in a principle which 
postpones its ultimate extinction for 50 years. At the same time it is 
impossible not to sympathize with the effi,rt as a whole of a l)odv which 
without any inspiration from Pariiament, is endeavouring to p^vide in 
advance for its future liabilities concurrently with the liquidation of such 
past liabilities. As regai-ds future appointments, we saw that the Council 
by increasing the meml^ers' contributions, hoped to prevent any further 
deficiency, and thus, with the assistance of its own contribution, which 



SHOULD PROVISION BE MADE IN ADVANCE? 



117 



is a i^ercentage of the salary imid as and when due, to provi<le the ijensions 
strictly in advance. 

333. In the case of the pr«jposed New Soutli Wales (Government 
Fund, the general concei)tion of which is to provide benefits in advance 
on the money puithase princii)le, we saw that the employer's contributions, 
though in this wise not forming a uniform percentage of the salary, are 
api>arently to be jmid strictly as and when the ineml>er's contriluitions are 
paid. Yet even here we found confusion arising through the proposal to 
spread the cost of the existing staff over a {period of 40 or 50 years, for it 
is impossil>le to siiy in such circumstances whether future service is being 
provided for as and when rendered, or even whether imst service will 
have been finally paid ft)r before the death of many of the i3ensionei-s. 

334. We have already remarked (ttee pirs. 177, 193 and 20(5) that much 
confusion as to employer's contributions would be avoided, where existing 
staff's are concerned, if all liability for past service were kept distinct 
from provision for future service. Leaving aside, therefore, for separate 
considemtion the manner of making financial provision for the reward of 
past service, the sound method of procedure appears to us to be (i) to 
recognize that pensions should be regarded in principle as deferred pay, 
(ii) from the time of such recognition to set aside proi^er contril)utions 
in respect of all future service, whether in respect of officers already 
serving or to be appointed in the future, and (iii) to provide that all 
such contributions shall be made during the working time of the officers 
concerned, and preferably, as we think, as and when ever)' piyment of 
salary is made. 

335. In saying this we must not be considered to be in any w^ay 
reflecting on the existing schemes that, without any public pressure, have 
been formulated generously by many of the larger Hospitals. These are as 
a class well-estfiblished institutions, and some of them have considerable 
resources to fall Imck upon ; they are, perhaps, the best judges of what 
liabilities they ought to incur. But for a geneml rule applicable to all 
large and small alike, we consider that the principle above laid down 
is the better one. 

(b) Should a Scheme include some Benefit iMvable on early Death ? 

336. Probably most people regarding this (question afresh, whether 
from the point of view of the employer or of the beneficiary, would ' 
favour a scheme providing some benefit for dependants in the event of 
death before the pension age. Most of the existing pension funds, 
however, subordinate this feature to that of su[)eiannuation, and the 
Hospital Officers Association took the view that, while pensioiu^ should 
be secured for the officers on as generous a -scale as possible, they 
themselves should Imj left to make whatever family provision might be 
most suitable in each particular case. The answer to the question is 
thus clearly not an obvious one. 



lis Ku:<,..„,.NrA,. guEsrioNs .nvoukd ,n anv «kneral scheme. 
empio^ti^. to pay m„re attention to tbis aspect of the case K,... 

in o^e.. that the, ^^^ T^£rr;L^z:':'^--- 
ZTrT r' "'" '^ "^'"^ "-'""^^ "^ «' leaser J .:i^^^^ 7; 

etaiT^trr It Th":-;'" ^-^ " '"^ ^'^^--"«! ei:;,L - 

Fund, witrthe 1 1 tf ! . •''"' ^'»^«'-"^-l^"ivil .Service Pension 
In Scotland thlari"'''r •""' '"'"""""" "' "motherhood. 

Hven in t,piX;:„::i:rr::crt T ?r ^""•^^• 

companies, then, is almost in variablyrinrnoLp T " ™"''"y 

on death; and frequently this apZ^aTer tht ■"'"'"*'°'" 

exceeds the pension already dlwn w! 7 ^T'"" *^'' "' '^' '""^ 
scheme for Secondary S ho^ tLh!^^ te 7 T '" f" "'■"'"•^'''^ 
of the Board of Eduction laid J lw„ fhlf " ''°"""'"" 

satisfactory should Drov,,l« «..* , . *' ""^ ^''''^'"e to be 

(- par. i). 'Ae?::;orzM^r':: v 'f r """-'^^ 

of nearly all Trade Union, IvT- , ""'""»'* "'^ ««''emes 

sehemes^of ban^in!:!! tn-S^n^ir ' *" ""'" '^ ""^""^ 
institutions. Many banks in SZ^ »■ "'' ^"^^ commereial 

lives of their office^ ij add "ioTt """l '"'' '^"'''''' "*' "'""^"•=« "» "'« 
A death benefit was ^ '^ \ " ^'■^'''"1'' J"""*'""^- (t'-'I- 1745, q. 1389.) 

Universities scheme Ihoul the" TT'' 'T" '" ''"^ ^^«-^«'' 
scheme was that it shouW t „i l™dan,e„tal conception of that 

feature being departed ^ t m^ ''"■^'" "' P^™"* ^^ '^is 

dependantsMn fm SeM fLH; ThtT t '""^""""-^ "'"^ "" 
the teneficiary, and in this con^tio,. ' . / \"^*'' ""'"'^ ""'' 
Hcconling to the latest «.port of Th! « . 1 '"'"""*' '" "*"« ""'' 
time 452 mem.,e«,, of Tom 1 'l' ""•,•""" """ ''^ *''^ P^-"* 
death benefit, and 227 dewlt V ?? ""' '''''' * considerable 
of p.-en,iums "' """"'"^ «"''«■• ^^'th or without return 



SHOULD DEATH BENEFIT BE INCLUDED ? 



119 



338. Unfortunately a death l)enefit costs money, even if it V« 
restricted to a return of contrilmtions as in a typical mutual fund. An 
.ulditional iKsneflt of this kind caiuiot Ije given in theory without either 
increasing the contribution or decreasing the ijension. Tins may have 
had a good deal to do with the advei'se opinion of the Hospital 
Officers Association, and not any objection to a death tenefit in itselt. 
Evidence, however, that we shall put forward presently (see Mr. Collinss 
Memorandum in Appendix IX, imr. 6) shows that a pie-pension death 
lieneflt in ceitain events may cost very little. We .shall also submit 
considerations in connection with the provision of disablement pensions 
{>,ee [jai-s. 441 et mi-, "ho 402) which appear to support strongly the 
desirability of providing a death benefit, and even perhaps making it 
compulsory in all case.s. We arrive at the conclusion that a substantial 
death benefit should form part of any satisfactory scheme ; but as it might 
prove to be desirable to make it optional, it would be a point in favour of 
a scheme that it should lend itself to such a variation. 

339 We have seen that in the case of mutual funds it is a common 
provision {see pars. 184 and 230) that in the event of death soon after 
the pension logins a death benefit is paid. It is usually provide<l that 
the total return, including pension payments already made, shaU never t>e 
less than the member's own contributions, with or without interest. 1 his 
practice has clearly been in response to a desire, which was also given 
expression to by certain Civil Servants (see par. 145). In the case of the 
Universities scheme, where the death benefit figures prominently, we 
have seen that, lai-ge as the death benefits may be in certain ca.^es. 
especially where death occurs just prior to the age of retn-ement the 
whole of such benefit disappears when once the sums available at the 
i-etii^ment age have been sunk in the purchase of a superannuation 
annuity However soon thereafter the annuitant might die, the 
dependants would t^ceive nothing. It was no doubt partly tor this 
mison that the administrative conception of the Universities scheme is 
that of a federation, where ela-stic powers are left with the constituent 
colleges The local governing bodies, who naturally know a good deal of 
the circumstances and state of health of the older membei-s, have po«^r 
to pay over the whole or i^art of the cipital sums maturing at 60 to the 
beiicficiary, or to make such other arrangements as may seem to them 
desirable. This is no doubt a useful provision, which may go far to 
modify the disadvantage we have referred to ; but the system is still too 
young to show how this feiiture will work in pi-actice, and we do not 
think that finality has yet lK>en reached as to the best method of combming 
a death benefit with superannuation. A perusal of the evidence submitted 
to Lord Courtney's Commi-ssion leaves a strong impression on the miml 
that the protection of life as.surance, or an analogous benefit, is in many 
cases needed throughout life ; and for this reason we think the general 
arrangement of the benefits under the new Civil Service scale, under which 
a cash pavment repU«jes on retirement the expiring death insurance, aftords 
a standaid which must lie bonie in mind in the construction of any future 
scheme In this connection it may be noted that there already exists in the 



^ 



I 4 I 

lU 



M!< 



120 >UN..MK.Nr.. ,„KSnoNS .NVO.VK0 .K A.V UKNEUA. SCHEME. 

provision vithir^t .1"' "" ■"* ""'''' °" "-""""-^ ^r fiunilj- 

attained witho ut .""anv ,v . I 7"".''""°" *»'« «»"»' object coul.I b^ 
witnout II, an> miy affecting tbe pension aimed at. 

(c) Should the Beneficiaries contribute towards the 
Cost of the Pensions ? 

the J,int„fviewofco~l^'n ''^'"""""' '"" P'"'""'" «-' 
that the scie of exiSrS J ^ L~ j-f ^'/t^'-'- - 

the staffs • and the Pvi.ll . . , ""'"■ P"-''""-* thi-onghout 

•showed that l'li"!7'"''l':^f'^ LonI .Southwark's Committee 

to contribute p" S he '»"' m ^" "'" " "'""'^ '^'^'P"-'-' 

equitable metC M^ c- 7^ 7 f " ""'' '"''""' '-""^ '•"-' "l-" 
that the sa„,e sentiment ex^lnwJ"^^!"'"' <'^^ ^PP«"<1- VII) 
Councils, and that th' c S to '^^^^^^ ^"'-^«'"" «"«'%"' 
their own initiative. We therefore thb.k. f '" "^ """""'^ "" 

question, as far a. we can 2. so ri^'^^^^^^^^^ "^^ "''"' '" "~ '"«= 

that t^ pre'J^Ln'ff rr !m'" 'T' f " '"^^ •"^" •^"'«-"' ^ «how 
been to L,ui J c^l^tt , Z"^ ''".1*"''^ "' '''^ nuKlern .schemes has 
London CoLty (ltd h^ ^Te ".'V'""'"^?""" ^^ ^'''^ '^at the 
to be insufficiem, increased the 1 '"^ T'' "' ''"»'"''"«o»s proved 

appoint„.e„ts so T^ e„ I^e uL'" T"'''''^ '" ""^ ''"•^^ "^ ^"'"- 
own contribution to tl ^ e" «" ^L JT"^ °' '"" *'"«'' '"-«"g its 
have also seen that the !to utorv ' I ^"^ T' "' """ ^''"•'««- We 

Asylums services we e a^^ ^^IrT f" '''.^ ^""-' P"- Law and 
Metropolitan Borough se"i ''r""'"'"^'^"''-^ = »»'' '"^--i- the 
Government Funds and to the «. "'*'"" ^^^'"" '" "'" ^'^'^ ^«''«n'l 
Wales as well as to Tu the «!.'"«"'"" ^"'^'^^' '" ^^"^ S"""" 
long list to place ^^ , e n'^ "?"""""'°" ''■"»"''• ™« '- 
and if contr^.utionTha 1 te, fol'^:? **'''"' "' '"• ^'""'"'"'t""- = 
many state and n.unicim Ischel" . "r*^""^' '" ""' «»«« "f «" 

they seem to In. stiU Z' "t " " f'"" """">■ """^ «*«''»'''e. 
whose financial resouriTrZ^V "'^ '" ''"^■^'^ "'^'"--- 

oon.si£ the c^: l^ T t!'.? '" T '^^'''"* '" ""« — '- to 

of the teaching profession. When the Universities 



SHOULD THE BENEFICIARIES CONTKIBUTE? 



121 



scheme was under discussion, altliough there might have lieen 
hesitation on the side of the Universities if it had not been that a State 
subvention was offered for the purpose^ there was Uttle or none as to 
the propriety of asking tlie beneticiaries to make a contribution on their 
side as a condition in the case of all future appointments. We liave also 
seen that the still more recent proposals for pensioning the lai-ge boiiy ol 
teachers in Secondary Schools, and the officers of Reformatory and 
Industrial Schools, are likewise upon a contributory basis (i^ee pars. 274 
and 279). 

iHS. The only outstanding case to the contrary is the grant of fi-ee 
old age pensions to the poor. In the case of the recent National Health 
Insurance legislation the assured are made to contribute ; and although 
the l)enefits in this case consist mainly of sickness and other allowances 
claimable during the period of contribution, it must not lie overlookeil 
that there is a disablement allowance which, commencing with any loss 
of earning power, will continue until age 70, and is scarcely to be 
distinguished from the opening period of the old age pension. In fact 
this pi-ecedent, with its concomitant contribution from the employer, 
seems to us to have a distinct bearing on the question befoi-e us. 

344. The late Mr. Manly, F.I. A. (see par. 248), gave us reasons 
why, at the end of a long ex[)erience of pension funds, he usually 
recommended employers to pay all contributions and thus keep the 
matter in their own hands. The reasons, broadly stated, were (i) that 
the service would be popular and salaries kept correspondingly moderate ; 
(ii) that superannuation after faithful service was the ideal to be aimed 
at, and contributions led to a demand for supplementary benefits ; and 
(iii) that the salary percentage plan, which he advociited. raised criticisms 
from contributors as to its equity. We gathered that this advice was 
more usually tendered to commercial companies or firms with ample 
financial resources. After considering the foregcjing reasons and the 
ideals on which they are based, we think that, on the whole, they are 
opposed to the general tendencies of the pension <iuesti{m noted in the 
couree of this Report, and are not applicable to the case of Hospitals. In 
particular they are opposed to our conclusions (i) that pensions should 
not be regai*ded merely as the reward of faithful service but in a full sense 
of the term as deferred pay (see par. 334), and (ii) that supplementary 
benefits are in themselves desirable. 

345. As to the sufficiency or otherwise of the salaries of Hospital 
staffs, it is very difficult to form a fair opinion without a close knowledge 
of the facts ; but it has usually been tacitly fissumed that the officers 
of charitable institutions are necessarily underpaid as a class. Fmni 
certain schedules of typical promotions and salaries which have lieen 
submitted to us, and to which we referred in par. 2(33, we are inclined to 
think that, while there are no doubt exceptions, the stiitt* salaries are 
usually what one would expect men doing similar work in other walks of 
life to be receiving There are, of course, exceptional cases of men of real 



i 



w 




I 



1 



1 

1 



III 



122 FUNDAMKNTAL QUESTIONS INVOLVED IN ANY GENKKAL SCHEME. 

mlministrative gifts to remunerate whom properly would be lieyond the 
power of most Hospitals. 

^46. And thei-e is a further consideration. If it became recognized 
that contributions were Wing regularly deducted from salaries, for the 
purposes of a scheme calculated not only to improve the spirit and 
efficiency of the stafts of individual Hospitals but to unify and mise the 
standanl of the profession as a whole, it is not improbable that the 
geneml level of the lower s^daries would tend to rise. Mr. Cai-son Roberts 
(.w Appendix VII) held strongly that thei'e is no such thing as a 
non-contnbutory system, a view confirmed by Mr. Manly'.s suggestion 
to employers that non-contributory pensions mean moderate salaries. 

347. In many professions, the organization of the membei-s 
especially when combined with training and instruction for the younger 
generation, leading up to examinations and the grant of diplomas, has had 
a marked effect in this direction. In a calling so many sided as that of 
Hospital administration there must be much room for such developments ; 
and we think that progress on such lines as would raise the whole status 
of their profession and make it attractive to men of talent would be more 
advantageous to the Hospital officers in the long run than might be even 
the grant of free pensions on the Imsis of their present salaries.* 

• 

348. We regretted that the Officers' representatives who appeared 
l3efore us were inclined to take up an adverse attitude upon this 
particular point. Since this Keport was dmfted a discussion on pensions 
has taken place at the Midlands Branch of the Hospital Officei-s 
Association, in which the view was strongly expressed that any pension 
scheme should be on a contributory basis, so that the -feeling of 
" repugnance to a gratuity, after years of hard work, would disappear " 
This confirms our impression (see par. 340) that the views of the parent 
association, a^ stated by their representatives, are not held universally in 
the profession, and we think it necess^iry for them to give the matter 
renewed consideration. For the foregoing reasons we ourselves have 
been led to the conclusion that the proposed scheme, to have any chance 
of success, must be on a contributory basis. 

349. With regard to the form of such contributions we have seen 
111 the course of our review that the system of deducting a prescribed 
pei-centage of the salary is the almost invariable rule : it runs throughout 
the schemes leased upon salary percentage pensions, where the percentage ' 
deducted varies with the age at entry, and was adopted as the basis of 
the Universities scheme, where the pei-centage deducted is constant at all 
ages. The Elementary Teachers Fund is ba.sed on a uniform absolute 
amount of contribution, but that affords no suitable precedent for Hospitals. 
The only other ou tstanding case to the contrary would seem to be the 

it8ei*ha« ShiHl^l'T '* '? '".^T*!?^ *^ .°?^^ ^^""^ **^« Hospital Officers Association 



SHOULD EXISTING OFFICERS BE INCLUDED ? 



12:j 



proposed new Fund of the New South Wales Cxovernmeiit (see pjir. o09)^ 
In this case the basis being a certain arbitrary scale ot umts ol 
pension, the contributions have to be adjusted to provide them Ihe 
conseciuence is that the percentage of the salary livable, both by the 
State and by the employee, varies not only with the age at entry but also 
with the progress of the salary. It may l>e thus less than 3 i^er cent, in 
the case of some young men, and may rise to U i>er cent., and possibly 
even more, in the case of older and highly paid men. A certain 
proportion of the latter is optional on the part of the officer, but a 
system under which, by exercising an option, he can oblige the employer 
to contribute sucii a high percent^ige of the salary, apiDears to us likely to 
open up fresh fields of controversy, and we think that the more usual plan 
of making the contribution for ea^h officer a consUnt proportion ot the 
salary should be followed. 

350 The question whether the prescribed pei-ceutage of contri- 
bution should vary with the age at entry, or be constant for all ages at 
entry, must depend upon the type of scheme selected. For pensions Uiseil 
on salaries a variation in the mte is absolutely necessary, lor pensions 
iKised on the money purchase principle we have seen that a unitomi 
total contribution of 10 per cent, at all ages produces .satisfactory i-esults, 
at any rate so tar as early entrants are concerned; while xMr. 1 inner s 
illustrations (see Appendix VIII) show that this principle can be applied 
equally well with a rate of ccmtribution ranging from 8 per cent^ for young 
entmnts to 12^ per cent, for older entrants, the pension benefats in this 
case l>eing mo^e in a<)Cord with those based on a salary pei-centage scale. 
The question of existing staffs calls for separate consideration. 

(d) Should a Scheme provide for Existing Officers or be limited to 

Future Appointments ? 

351 As a matter of abstmct principle one would say that existing 
officers by their past services should be the first t^ enjoy that sense of 
security for pensions which they have hitherto lacked. It is obvious, 
however, that the nearer an officer attains to the pension age, without any 
existing provision having been made for his superannuation, the greater 
will be the future annual cost of providing in advance for his pension. 
It will be useful to see what light we have been able to throw on the 
methods generally adopted for superannuating existmg staffs, and the 
financial cost of doing so. 

352 In the case of the Police, the Poor l^w and the Asylums 
Services all existing officers were included, the rates of contribution for 
the older of them being 21 per cent, and 3 per cent, of the salanes 
instead of the 2 per cent, or 2* per cent, requiml from juniors and new 
entrants Such a rate of contribution would provide but an insignificant 
portion of the pensions, and thus in these cases the additional cost ot 
providing for the existing staffs falls mainly on the local i-ates. Ihe same 
applies to the Metropolitan Borough schemes and probably to most of the 
local and municipal schemes authorized by Parliament. 






1^4 FUNDAMENTAL QUESTIONS ,NV..LVE« ,N ANV CENEHAL SCHEME. 

all exkHM.^J"f ^' *" '^' :T '''""^ ^""''-^ "*"^ ^«f "P- ^« «««• that 
" L. eeof tir "r"" '"'"' '■" ''"' N-v2«»'-J«ove,-„me„t schemes, 
as much nV.'. "" "? '"'"^ contributed by the younger entmnts, and 

he llZ:r ,""' '",•" '"•^"'«^'-'- - -•'■<1— ' '->• the deficits on 
the valuations which nu.st \^ n.ade goo<l by public money The British 

r^way c..„,«nies li.ewi.se included the' ^ho.e of tL st^fff 
Tctn /,T,"''' ''""*'""■«'"'« "' ''"y way con^sponding to the 

354. It i.s not easy to see in any of the.se ca.ses a .solution of the 
Z>w ". T':'' 'r """P'**'-''- '•"•'■"« »" *« -- that we h^ e 

mrin :T ■' '"""''°" •^'"''' "'' "••"" '"""'"»' i»vestigatio„B 

een elT ' 7' T'"'; *° "''"'' "" '"**" "''^''y '*'^-" 'Attention, is 
seen to emerge clearly. It is that the deficiencies which have almost 

invariably ansen, and the difficulties and diffe..„ces of piuetice thatia" 

supervened m the effort to liquidate them, have either o^. Itdlr 

^e. aggravated through including the existing staffs without p^Z-rW 

.^ckonrng beforehand the full cost of doing so. This is especially hi^ta 

^thTll/s :?' ^""^^ P'""' '''"^' '' "- -ali;be.n mi^ 
m the n.ethods of ft-ammg schemes.* Institutions like the Hospitals must 

^.7^;^l '-' '" ^~ '-^°- — "'"^ thems^elves?:: 

pars'iS mSi^'^^r.rK "\"'"" '"'' "•"* *" ^••^ ''°'«^'"«°n (-- 

Cent it e,' ' T! th . ^ •^.' ■'"' P'"'''^'" "' ""' «'"^""« *"««•« -»"W 
present itself to the lay mmd in a much simpler aspect if a clear 

differentiation !„, ma.Ie between pa.st service Ld future ervice 1 

set out ,n par. 334 as to the proper metho.1 of providing in advance the 
pensions .„t „,. ^„ ,^^^^ ^^^.^^ ^ and clearly defined 

problem remains as to the financial cost orpi^viding supplemenU^ 
pensions in respect of past service. pp'emenuiry 

3.56. It will haw been notice<l that less confusion has occui-red as 

-/I and 310). Mr. linner in his proposed scheme based on Vhut 
system, while able to deal with the difficult ^.blem of^L^lt couS 
only mclude the existing staff in i.spect of future service, everything 
beyond that being the subject of separate financial provi.sion As we havf 
a re.^^^ remained (... pa. 3.4), it is in our opinion a .^c^initdlti^^^^^^^^^^ 

the piesentca.h value of every benefit and thus, in the case of oast 



A statement on this point by Mr. Carson ^heii^^^iii^^il^i^^^ri;^^ 



COST OF INCLUDING EXISTING OFFICERS. 



125 



The Cost of Pensions in respect of Past Service. 

357. Bearing these considerations in mind it will now be instructive 
to revert to Mr. Manly's scheme, which, though not based on the money 
purchase principle, did propose a serious effort to provide in advance 
for the existing staffs. Mr. Manly proposed (s^e pars. i>4-2 and 243) to find 
the extra cost of providing for the existing staffs by contributions, payable 
by the Hospitals, of (i) lump sums - to provide for l^ack service 
proportionate to the past service of the officers, and (ii) larger annual 
percentages of the salary for the future than would be paid for younger 
entrants. We have already pointed out {me pars. 340 an«l 3i>0) that 
increa.sed percenUiges at higher ages of entry are normally necessary for 
the salarv percentage method ; and Mr. Manly would thus at first sight 
seem to he providing separately for past and future service in the manner 
approved in par. 355. For our present purpose, however, of estimating 
the financial cost of pa.st service an existing staff cannot l^ i-egarded as new 
entrants, and the increased percentages payable by them through not having 
started when young must be reckoned as part of that cost. For example, 
taking Tvpe Case No. I (of Appendix X), with a present salary ot £<>00, 
and supposing the officer were entering the scheme at age i>0, the 
estimated lump sura to be set up would be 9 per cent, of his total past 
salary, or about £820 ; and the future annual contribution to he paid 
was estimated at 1 U per cent, of the salary, or £69. This latter is £33 m 
excess of the constant ratio of about 6 per cent, that would have l)een 
payable had the fund existed throughout his service ; and this excess 
charge should in our view l)e regarded, like the lump sum of £820, as i>art 
of the cost of including the officer in the scheme. We have already made 
a rough estimate (see par. 243) that in the case of this scheme the total 
cost of tlie pensions in respect of pa»st service may be put at about 70 per 
cent, of one year's salaries. The pension age in this scheme is 60. 

358. In this connection the calculations of Messi-s. Manly and 
Ackland, based on the st^itistics of the Metropolitan Borough Funds 
(see pars. 181 and 205), are instructive. We saw that, whereas 81 per 
cent, of the salaries wjis the standard rate of contribution to pn)vitle 
the pensions if it began at age 20 and continued throughout the service, 
no less than 1915 per cent, must on the avei-age be contributed 
on the whole of the salaries if the existing staffs as they stood were 
to be brought in. The sciUe of benefits here provided for approximated 
to old Civil Service terms, the pension age l)eing 60. This additional 
charge of about 11 per cent, of the salaries appears to have been 
calculated for the average of the future working service of an existing 
staff, which on the data used represented an average age of alx)ut 
39 with an average future duration of about 25 years. The annual 
charge might therefore be taken at about 15 years purchase and represents 
a capital sum of more than one and a-half years' salaries. As we have 
pointed out (see par. 181), these calculations included, for some reason 
ot convenience, the future cost of a normal proportion of pensions 



126 FUNDAMENTAL QUK8T.0NS .NVOLVED ,« ANV OENEHAL StHEMK. 

^|2<ly gmnted. In the case of the Hospitals, we have seen that the 
ei„7 r •"" *'" "^' »f-«-"-'t n„,st have led to the p,.8ent 

ZL^« n "L^"""""'"' ("" ^'- 233 for the experience of 

XS^^Z' ^*""^ '^''*'"' ^""'')' *•"' f*"- '»•■« •*»--» *e inclusion of 

I nTn"^ '""' '"' """"' "^ ""■^'•'* «' «"'' •* *0"ght. Indeed! 

t e probable existence of congestion in the Hospital staffs suggests tba 
all s„ch^est,„«tes not taking account of this factor .ay en- oTthe sSe 

fh»f ff ■ T".'*'' '" *'"' """^ "^ ^''^ ^"''"^ ^^'»"'' ^■"nds (see par. 205) 
tha the cap,tal cost of including the existing staffs was possibly aLt one 
years salanes, notwithstanding the higher contributions made by the older 
entrants and the heavy withdmwals. In this case also the scale of 
pensions approximates to the old Civil Service scale, and there are death 
and withdrawal ..enefits in ad.Iition. The pension age is 60 for aS 
30 per cent, of the memtership and 65 for the renwindler. 

360. Mr. E. V. Thomas, F.I.A., an actuary who was closelv 
~ted with the late Mr. Manly in his pensL work, has ten 
good enough to comnu.nicate to ns particulars of a typical pension 
scheme on the .sala,y percentage methcKl which he had EeTf 

S'^ Th * -^'"^ "' '''""' "^ "'^'"'""^ -''" » -""T > "of 
i80,000. The pensions were bised on sixtieths of the average 

salary, and were to Ik, clainmble normally at 05, or eariier on <lisablement 

w,th a mnumum of £75 per annum and a maximum of £3.50 (t' 

withdrawal the members own contributions we« to be returned, and on 

death the .same plus 50 per cent. Intei^st was to be guai^nteed by the 

employer at 4 per cent, (free of tax) an.l no expenses we,^ to ..e chaLed 

The existrng staff were to be included, and Mr. Thomas's estimate of the 

present ca-sh cost of doing this was £86,000-an amount, it will be seen 

equal to more than one year's salaries. These older entmnts we.^ to pa^ 

only the rate of contribution properly applicable to entmnts aged 20-^ 

As this rate would not suffice to provide the proportion of the pension to 

be earned under the .salaiy percentage method in resfject of futu«, 

service, .t would seem that in this ca.se a sum of one yeak salaries Z 

staff in the sense in which we have used that term {gee par. 357). 

361. In the case of the propo.sed scheme for officer of Reformatory 
and IndiLstrial Schools, we found {.ee par. 291) that the provision for thi 
existing .^affs would entail an additional though deceasing annual change 
of £10,.»9 on a total .salary list of £155,153. As the hulk of this chaSe 
IS in respect of officers aged from 40 to 60 it should not I^ capitalize.1 at 
more than, say iO years purchase, and this would represent a sum of 
about two-thirds of one year's salaries. The relevancy of this .^.sult is 
affected by the fact that the scale of resulting pensions, being largely 
bared on exi.sting salaries, is different from one based on final or avenige 



COST OF INCLUDING EXISTING OFFICERS. 



1-2] 



salaries ; though inspection of the specimen pensions given in Appendix XI 
suggests that they would be found not to differ gietitly from sixtieths of 
the average salary. 

362. Mr. Tinner, like Mr. Manly, was unable when he presented 
his scheme to give us any trustworthy estimate of the cost of including 
the existing officers in the absence of fuller statistical data of the 
Hospital staffs, lie has since, however, been good enough to make some 
further calculations based upon data of his own, after satisfying himself 
that the mtes of salary progression assumed by him produced very 
similar results to those of the typical cases used by us (see Appendix X), 
based on certain facts. After further assuming a uniform contribution 
of 10 per cent, of the salaries, as in the case of the Universities System, 
and that the age distribution and retirements, etc., would agree with his 
own tables, Mr. Tinner arrived at the conclusion that the initial cost of 
including the existing Hospital staffs in his scheme would he somewhat 
more than two years salaries. It is surprising that this estimate should 
be so large. Mr. Tinner, however, has reckoned only on the uniform 
contribution of 10 per cent, in all cases, and any application of the money 
purchase principle on such a basis that aims at levelling up the pensions 
of older entrants to the results secured by those who l>egin in eariy life 
must necessarily, as is clear from the figures of the New South Wales 
Government scheme (see par. 308), be expensive, and leave a heavy 
balance to be provided in some supplementary way. 

363. Gathering together these estimates, mostly of a ver)' 
rough and provisional kind, there seems to be room for a general 
conclusion that where a scheme of pensions is leased on the Hilary 
percentage method, with 60 as the pension age and graded contributions, 
the present capital cost of including the existing staff may l>e reckoned 
at something like one year's salaries if the benefit is calculated on the 
average salary throughout service, or something like one and a half years 
salaries if it is calculated, as in the case of Messrs. Manly and Acklamrs 
results, on the final salary. The estimates we made in the case of 
Mr. Manly's scheme and in that of the New Zealand Funds were 
respectively smaller than these, but allowing for the special circumstances 
of those estimates they appear on the whole to confirm this conclusion. 
As regards Mr. Thomas's estimate of about one year's salaries for pensions 
based on the average salary, but commencing at age 65 instead of 60 as 
in the foregoing cases, it appears at first sight to be high compared with 
the others. His contributions, however, are not graded for the higher 
ages, and his capital cost is, therefore, more in accordance with facts as 
we view them. On the other hand, it is not itself a satisfactory basis for 
us to proceed upon, as we have no means of determining to what extent it 
would be increased if 60 were adopted as the pension age instead of 6o. 
As regards the difference between this estimate and Mr. Tinners 
estimate of two yeai-s' salaries for his own scheme, we are advised by 
Mr. Tinner (see Appendix VIII, Addendum) that it must l>e ascribed in 
part to the manner in which the question of withdrawals enters into 



Hi 



128 FUNDAMENTAI. QUKSTIONS INVOKED IN ANY OKNEKAL StI.EME. 

the calculation.s. I„ the case of Mr. Thon.as's p,-opo8e<l fund the 
estimate of cost is lessened by allowing for with.lmwals both in the 
^.st and ,n the future. Mr. Tinners method ignores withdmwals 

exUt"^^' "I'V"; 1. ^' ""P''"""' P"''**'"'-^ «^»Kg<^™te« the "ges of the 
ex.stmg staff and the cost of providing for then, in respect of past 

service. As regards future withdniwals we shall later on make a formal 

■ ecommendation to the Executive Committee {.ee par. 485) the full 

<!cceptance of which wouM remove any possibility of p„,ftt or saving from 

this source. Mr. Tinner's ,li.srega,tl of profit from futu,^ withdrawals would 

thus agree with our proposed method of tre,iting them in pmctice ; 

whereas Mr. Ihomas's assumption would understate the cost. Mr. Tinner 

has obligingly tried toa.ssist us in deciding what deduction should l>e made 

from his hij^t estimate on account of pa.st withdiuwals. and suggests the 

adoption of one and a half years' current s,ilaries as a revised estimate 

of the cost of pensioning the existing staffs in respect of past service. 

tor tlie rest, Mr. linner's suppo-sed scale of contributions is higher We 

have already shown Ue. ,«„.. :J20) that a 10 per cent, contribution under 

his plan would provi.le'at age «I pen.sions .similar to the avemge salair 

peusioiKs of Mr. Thomas, so that Mr. Tinner's suggestion of one and a half 

years salaries allows for .suitable ,.ensions at an age four yean, earlier 

'""'. n T"'' ■*"''"" """ '■^*'^'- The two estimates are Imsed on 
es.sent.ally different principles, and cannot be reconciled exactly • but the 

result, on the whole, is to confirm Mr. Tinner's estimate of one and a half 
years salaries and to suggest that it does not err on the siile of over- 
statement. 

r, J^^\ ^'^ '""■' '""* '•""" ""* "'"' «e ai-e warned bv Mr. F L 
Collins (..« App,,.n.lix IX. pir. 21) that in any event th'e amount of 
current siihrnes cannot be regar.le.1 as affording in it-self a guide to the 
cost of providing pensi.ms in respect of ,«st .service, and that only by 
the u.se of pro,3er statistical .lata, such as he in.licates, can accurate 
actuanal estimates be ma.le. He has been good enough, however, to 
calculate the cost of providing s,i,ieraniu.ation in respect of past service 
in the ca.se of the Hospital tyr.e ca.ses individually (.ee Appendix IX 
pars. 20 and 2 1 ). The assumed scale of benefits is that of the Univei-sities 
scheme, an.l the conclusion is rcacheil that the amount nece.s.sarv in most 
ca.ses ,s represented by the preseiibe.l contribution of 10 percent of the 
past salary accumulated at 3 per cent, interest f<,r the period of the past 
service, fbis way of regaitling the cost retrospectively cannot l« correlated 
in any«-ay with Mr. Tinners result arrived at by a prospective 
process, but we have forme-l the opinion that it supports the sutHciencv of 
Mn rinners estimate. It is also a reminder that where contribuJion 
and benefit are related, as in the money purehase method, the cost 
of an exi.sting staff in respect of i>ast .service should l>e lai^elv independent 
of the form of the nitin.ate benefit ; and it probably indicates the best way 
of approaching the problem of cost when more exact statistics are available 
Mr Collins has also communicated to us some mass estimates l«sed on 
applying his accumulation method to certain statistics of existing staff's in 
the service of the New South Wales Government. Here he found that 



COST OF INCLUDING EXISTING OFFICERS. 



129 



the accmnulated amounts requiretl represented nearly two years' current 
salaries in the case of the salaried staffs, and about one and one third 
years' salaries in the case of lowei- paid men and workmen. 
Though the conditions of service may not be analogous, these 
results appear to confirm the conclusion that for a provisional working 
estimate the cost should not be placed below the one and a half 
years' salaries which Mr. Tinner has suggested. At the same time it 
seems clear that the estimate to be adopted for salaried officers must l>e 
modified in the case of the nursing staffs and the weekly wjige class. 

365. It is obvious from what we have said, that the cost of providing 
for an existing stiiff in respect of past service nuist dej^end mainly on tlie 
scale of contributions to be adopted and that it has no actual relation to 
the amount of current salaries. It seemed to us to be so desimble. 
however, in discussing the question of existing officers, to give the 
Executive Committee some sort of indication of the sums likely to l>e 
involved that we have thought it right to make what use we could of 
the limited data before us. We shall therefore assume, as the net 
conclusion from the foregoing considerations, that a suitable scale of 
benefits could be provided in res[ject of the pjist service of an existing 
staff for a capital sum equal to about one and a half yeai-s' current 
salaries; and that it would l)e unsafe to reckon on reaching any complete 
solution of the question at a lower cost than this. 

366. When we come to consider the pensionable sidary list in each 
class, we are met with the further difficidty that the existing statistics 
collected by the King's Fund do not subdivide the classes into the 
categories necessary for our purpose. An additional difficulty arises fi*om 
the fact that the war has temporarily altered the constitution of the staffs 
from the point of view of age and duration of service, particularly on the 
nursing side. We have therefore thought it best to start with the 
statistics of the King's Fund for 1913. After revising the value of 
emoluments in view of the increase of prices, the experience of certain 
typical Hospitals was analysed and used to estimate for the whole Inxiy 
the amount of salaries and emoluments falling into the different classes. 
It was then assumed that the corresponding figures for 1917 would he 
such as would result fiom the genei-al rate of growth in the staffs observed 
in the interval. We thus disregard any accidental distribution resulting 
from war conditions. 

367. The first result of this investigation was to show the very lai-ge 
amounts paid in salaries and wages to certain classes include<l in our 
earlier Tables (nf^e pars. '^2 and 83) whom it would obviously be impo.ssible 
to include in any pension scheme. In this category would come a large 
part of the medical officers' salaries. It is impossible to say what is 
the small proportion of this class that might prove to be pensionable. 
Similarly a large annual amount represents the cost, especially the 
emoluments, of the female servants and scrubbers. Of this class there 
must clearly be a certain number of permanent servants who should be 

I 



hi I 



1^ 



\ 



130 FUNDAMENTAL QUESTIONS INVOLVED IN ANY GENERAL SCHEME. 

provided for. A certain number are pensioned, in fact, under the existing 
pmctice. It seems equally obvious, however, that the great bulk of this 
class give service of a casual and fluctuating kin<l, and are not pensionable. 
Prol)ably the best way of dealing with it would l)e to include such servants 
in the scheme only after a certain qualifying period of service, whenever the 
latter might l)e said to approach permanency ; or by some other pi-ocess of 
elimination that would commend itself to those familiar with the facts. 
We have, however, no means of determining what proportion of this class 
should be estimated for. We can only exclude it, and allow some make- 
weight elsewhere. 

368. As regards the nursing class, we have made some endeavour 
to divide it into three groups, of which Group I would represent the 
matrons, sisters and staff nurses (me pars. 98 and 99) who are to be 
regarded as pensionable. Group II would be the younger nurses in 
training from their second year onwards, to whom our separate 
recommendation for that class would apply. Group III would be the 
probationers and others not eligible for either scheme. Here again we 
have no available statistics to enable us to constitute these groups in any 
final way. Certain typical Hospitals were, however, good enough to 
furnish us with special returns of their nursing staffs ; and after analysing 
these we have arrived at the conclusion that, of the total salaries and 
emoluments estimated for the nursing staffs, about 25 per cent, may be 
placed in Group I, about 50 per cent, in Group IL and 25 per cent, in 
Group III. 

369. We thus arrive at the following estimated totals in respect of 
the pensionable classes. The 1917 figures are based on an all-round 
increase of 20 per cent, in respect of the four years : — 

Estimated Pensionable Salaries and Emoluments. 



Class. 


1913. 


1917. 


Salaried officers 

Weekly wage (males) 

Nursing (permanent) 


£ 

97,000 

98,000 
80,000 


£ 

116400 

117,600 
96,000 


Total 


£275,000 


£330,000 



370. Our estimate of one and a half years' salaries and emoluments 
to represent the cost of pensioning an existing staff was based on 
considerations applicable only to the class of s;ilaried officials. The cost 
in the case of the weekly wage (males) class would probably be quite 
different. We have found (see par. 189, a/ifo Appendix V) that the cost of 
providing pensions for this class is somewhat lower than the other, partly, 
no doubt, on account of less .settled conditions in the service. It is 



COST OF INCLUDING EXISTING OFFICERS. 



131 



therefore reasonable to assume that, with a lower average of jwst serxnce, 
the cost of an existing sUiff in respect of ptist service would likewise l>e 
smaller. In reckoning the one and a half years' wages in thi.^ class we 
shall, therefore, make a deduction of 1 5 per cent, from the wages. This, 
though little more than guesswork, is based on Mr. Manly 's figures in 
Appendix V. We do not lose sight of the fact that a great many men 
employed in this chuss would be casual employees, and not pensionable. 
On the other hand we understand the Hospitals employ a lai-ge numl>er 
of men whose wages enter the accounts under other headings. We cannot 
attempt to measure these divergent forces, and we .set them off against 
one another. 

371. In the case of the nursing staffs, likewise, the conditions of 
service are quite different. Owing to the generally accepted necessity for 
an earlier age of retirement in this class either a similar scale of 
contribution to that of the general staffs would give smaller l)enefits, or 
for similar benefits there nmst be a higher scale of contrilnition. This 
wcmld apply not only to benefits in respect of future .service, but 
also, and possiI)ly with added force, to any l)enefits in respect 
of past service. Even if we put the sciile of contribution at the 
same level as that of the officers and assume lower pensions 
accordingly, it is thus still doubtful whether the co.st of past 
service, when reckoned on the current salaries, would not he on a 
higher scale than in the salaried officers class. On the other hand 
(ifee par. 61) there is probably a lower average duration of past service in 
this class. In fact the evidence as to frequent migration among staff 
nurses and even sisters is so strong that we think we should have been 
justified in deducting 50 per cent, of the salaries on this account. It is 
necessary to include, however, some makeweight for female servants who 
will be pensional)le. Although we are again in the region of guess-work, 
we propose to deduct 25 per cent, instead of 50 per cent, from the 
salaries. In these, however, are included a full estimate for emoluments, 
in accordance with the principle stated in paragraph 99. 

372. With these adjustments, obviously of a rough and provisional 
kind, we arrive at the following 

Revised Working Estimate of Pensionable Salaries and 

Emoluments in 1917. 



Class. 


Deductions from 
previous total. 


Pensionable 

salaries 

and emoluments. 


Salaried officers 

Weekly wage (males) 

Nursing (permanent) 


Nil 
15 per cent. 
25 per cent. 

• • • 


£ 
110,000 

100,000 

72,000 


Total 


£288,000 



I 2 



132 FUNDAMKNTAL QUESTIONS INVOLVED IN ANV GENERAL SCHEME. 






If we allow for a further increase in salaries, owing to general growth, 
it may be estimated that the total amount of pensionable siilaries 
and emoluments, thus adjusted so as to permit of the application of 
standards suitable to the salaried class, will reach som(5thing like £:{00,000 
in the course of 1918; and that is the figure we propose to adopt in 
discussing concrete figuivs. Applying to it our proposed standard of 
one and a half years' salaries, we arrive at the sum of £4:)0,000, as the 
estimated cost of pensioning the existing staff's in respect of past service, 
without making any allowance for the inevitable increase that must occur 
owing to the normal growth of staffs if the question be postponed to the 
future. It is obvious that a conclusion liased on assumptions in so many 
fundamental mattei-s should be i-eceived with all reserve pending the 
collection of exact statistical data ; and that as soon as the type of the 
proposed scheme lias been determined, a proper actuarial investigation 
should he made into the whole (question of the existing staffs. The 
eventual cost may well prove to be less than the sum we are assuming 
provisionally. 

373. While it is clear that no scheme could be considered ideally 
complete that did not provide for the case of the existing staffs of the 
Hospitals, it is thus equally clear that the question is one more of 
finance than of principle. If a scheme were to be initiated, it is obvious 
that an eff()rt should be made to include the existing staffs. 

374. Even if this end wei-e to involve the immediate provision 
of as much as £450,000, so that the present officers and staffs who 
have borne the burden and heat of the day might be placed in a 
position as favourable as if the scheme had covered their whole working 
time, we do not think it should be ruled out as necessarily unattainable. 
The King's Fund from the time of its institution has l»een the recipient of 
princely benefactions, and it is to l)e hoped that, upon this need becoming 
known and realized, the necessary funds would l>e forthcoming. There 
are many wealthy persons who cannot fail to recognize that institutions 
like the Hospitals of London directly depend for their success on the 
brains and willing .service of the officers who administer them, that 
the efficiency of the officers and of the whole of the staffs must 
in turn directly depend on the attractiveness of their career, of 
which a suitable provision for old age has been seen to be an 
essential part; and that money expended in that direction may, 
from the strictly business point of view, eventually prove to be a more 
fruitful factor in relieving sickness and suffering than money which at the 
moment might seem to be applied more directly to that object. We put 
forward this argument quite deliberately as one to appeal to men familiar 
with business and the conditions on which success in business depends. 

375. While. we thus hope it may be possible to secure whatever 
sum may be necessary for gaining fully an object likely to have such far- 
reaching effects in the future, it is to be noted that if onlv a smaller sum 
were to be available it would be fairly simple to devise machinery by 



^p^ 



COST OF INCLUDING EXISTING OFFICERS. 



133 



which it could be applied, as far as it would go, in such a way as to 
secure l)enefits to the existing staffs. Thus even if they could not l)e 
assured at once of recompense for the whole period of their ptist .service 
a part at least of it could be brought into acccjunt, and the amount of 
jjast service for which a full sense of security does not exi.st would thus 
to that extent Ije diminjshed. 

370. A great i>art of the pains we have taken to elucidate the 
problem of providing for the existing staff's will have been lost if we have 
not made it cleiir that, whatever plans may thus be possible for the 
i-ecompense of past service, the question of future service must Ije kept 
(|uite distinct. In the case of the Universities scheme (see par. 271) 
compulsion applies only to future appointments, all existing officers l^eing 
left to be provided for by the individual institutions. Our own conclusion 
on the principle governing this point (arrived at in par. 334) was seen to 
be different. Dating from the inception of the new scheme, provision 
should l>e made in advance for pension in respect of all future .servic^e. 
This involves, to some extent, the re-opening of .salary contracts with 
existing officers; but it could lie left to each individual Ho.spital to 
determine in what proportion its officers must be prepared, in consideration 
of the general benefits of a pension .scheme, to contribute in respect of 
all future salary. That, from the point of view of the central council, 
would be probably a domestic matter, provided that the total contribution 
paid by or in respect of any officer reached the prescribed scale. Such 
scale, following the principle we have adopted in reckoning the cost of 
past service {see par. 357) would probably be based on the original age at 
entry ; but there is no reason why it should be limited to that if the ci>st 
of past service he not wholly provided from extraneous sources and if 
financial considerations should permit the Ho.spitals to arrange for a 
higher scale. 

377. The contributions thus levied would in any case purchase 
only reduced benefits proportionate to the remaining working time 
of the officer. As time went on, however, even if no sj^ecial fund 
existed, such as we have sketched in outline, for the full reinstatement 
and recompen.se of past service, the problem to l)e faced by the 
Ho.spitals of dealing in arrear with jmst service would graduidly become 
less and less extensive ; so that when younger officers now in the servic-e 
came up for pensions in the future, these would be found to have l)een 
largely provided in advance. To a limited extent the mere inception of 
such a scheme would thus l>egin at once to import an improved sense of 
security into the service, an effect which would inciease as time goes on 
with every year of strictly pensionable service added to the past i-eooixl of 
the staffs. 



I 



134 



hi 



K 



hi 



\P 



GENERAL CONCLUSIONS AND ALTERNATIVES. 

SUMMARY OF CX)NCLUSIONS AS TO GENERAL 

PRINCIPLES. 



o78. We are now in a position to supplement the pi-eliminary con- 
clusions set out in par. 115, and to answer the question, what are the main 
pnnciples to which, in the special case of the* voluntary Hospitals of 
London, a satisfactory pension scheme should conform ? 'i'hese would 
seem, in the light of the information we have gathered, to be as follows :— 
(i) That the pension should be claimable by a member of the 
permanent staffs at 60 or other stated age, so as to facilitate 
retirement when a man is getting past his best. It is also 
desirable for the same reason that retirement should in any 
event take effect at age 6o, or some other stated age ; and 
that a pension should be available in the event of permanent 
loss of health. 

(ii) That the pension should be well secui-ed and, in case of long 
service, adequate in amount. It follows from this that it must 
represent an adequate proportion of the salary. 

(iii) That it should be possible for officers to migrate freely from the 
service of one Hospital to that of another within the scheme 
without forfeiting any part of the l>enefit. 

(iv) That the pensions in i-espect of all future service should be 
provided for wholly in advance, no liability being left to be met 
by the HospiUils after the officer's service has terminated. 

(v) That, as in the case of the Civil Service Suj>erann nation Act, 
1909, there should be some death benefit available for femily 
provision, and also, if possible, some cash endowment on 
retirement, but that there should Ije sufficient elasticity in the 
scheme to meet exceptional cases. 

(vi) That inasmuch as such substantial benefits as the foregoing 
would be a gretit advantage to the officers they should be 
prepared to make some sacrifice to secure them, and that the 
scheme should be on a contributory footing, the contributions 
datmg, as regards the future service of existing staffs, from its 
inception. 

(vii) That such memlxjrs of the nursing staffs as remain permanently 
m the service of the Hospitals should l>e included in the general 
scheme, any provision assured in the separate scheme for young 
nurses counting, as far as it will go, towaixls the ultimate benefit 
in the general scheme, 
(viii) That the weekly wage staffs, as well as female servants and 
scrubbers, should likewise be included in all cases in which the 
employment is of a permanent nature. In these classes it might 
be necessary to prescribe a minimum period of service. 

(ix) That in all cases the estimated value of emoluments should be 
added to salary or wages for the purpose of reckoning 
contributions and benefits. 

(x) That the scheme should also provide pensions for the existing 



tn 



METHOD OF GIVINi; EFFECT TO THE FOREGOING CONCLUSIONS. 135 

staffs in respect of their past service as far as funds for 
providing the additional cost may be available. 

We submit that on the whole these conclusions follow logically from 
the facts and considerations that we have brought under review. In the 
case of the nursing and weekly wage staffs, and servants, the general 
principles must, of course, be applied mutatis mutandis. 

Methods of giving effect to these conclusions. 

379. It remains to consider whether any, and which, of the various 
types of schemes we have passed in review comply with the conditions 
thus laid down. A glance at the original classification of schemes 
made in par. 124 will show thjit all systems included under headings 
(a), (b), (c), (d) and (e) are excluded because the pensions are not 
provided wholly in advance, and any scheme for the Hospitals eml)odying 
the principles above stated must come under either heading (f), i.e., 
pensions provided wholly in advance on a salary percentage scale, or 
heading (h), i.e., pensions provided wholly in advance on the money 
purchase principle. Those under heading (g), i.e., on an absolute scale or 
flat rate, have l^een excluded already as unsuitable. 

Discussion of Alternatives. 
Pensions on a salary percentage scale. 

380. If a satisfactory scheme could be devised with a salary per- 
centage scale of pensions provided in advance by annual contributions, 
after the type of the mutual funds set up by the London County Council, 
the New Zealand Government and the great British Railway Companies, 
it would comply witli a great many of the conditions enumerated, for the 
pension would be directly proportioned to the salary, it could \ye made 
available in case of disablement, and there is no theoretical or constructive 
difficulty in providing a death benefit in addition to the pension. On the 
other hand, we have seen that the salary percentage plan has not pi*ovi«led 
satisfactorily for the problem of the existing staffs. The endeavour to 
meet this problem has, in almost every case, resulted in deficiencies owing 
to the pension being bised on the sfilary instead of the money avaiUible to 
purcha.se it. 

381. The experience of such funds as those we have specified 
pi-ecludes us from i-ecommending the adoption of any scheme of this type. 
The fact itself that the pension is based on the salary involves the fund 
from the outset in such uncertainties that the mutual principle fails to 
provide that security so essential for a pension. Though perhaps the 
chief, this is far from l)eing the only element of financial uncertainty. The 
various kinds of risks affecting a fund of this class have l>een already fully 
set forth (see pars. 127 et seq.) in this Report, and discussed further in 



136 



UEMERAL CONCLUSIONS AND ALTEKNATIVES. 



MUTUAL FUND ON SALARY PERCENTAGE METHOD. 



137 



\U 



paragraph 246 iu reference to the particular scheme prepared by Mr. Manly 
for the Hospital Officers Association. These speculative elements are so 
numerous and fundamental, and have been seen in the coui-se of our 
Kej)ort to have acted so detrimentally to many existing funds as to 
render such a scheme unsuiuble to the Hospitals of London in the 
absence of some strong financial support ; and for this purpose financial 
support has been seen to mean not only such assistance, if any, as might 
be needed to initiate a scheme, but an obligation to assume possible 
liabilities of very large amounts in the future. We found {see par. 220) 
that very great deficiencies have arisen in the working of the Railway 
Superannuation Funds ; also that in the case of the Railway Clearing 
System Fund there was in 1003 (gee par. 233) a deficiency of £482,937 
on a fund of £1,112,092, and in 1910 a new and quite independent 
deficiency of£427,305 on a fund of £1,252,313. In this 1910 valuation 
the cause was largely the longevity of the pensioners, but in the other 
cases the deficits were due mainly to disturbing elements, arising out of 
the salary pei-centage principle, which actuaries of great authority had 
been unable to foresee. 

382. If financial guarantees of ample amount were to lie forthcoming 
It would then be necessary to consider the feasibility of adopting this 
principle from the administrative side. In order to adapt it to the special 
circumstances of the Hospitals of London and to include the principle 
of aggregated service so as to provide for free migmtion it would be 
necessary to have a central fund managed by a representative committee. 
There is strong evidence to show that, as we h(ive alieady suggested in 
paragraph 24r>, the difficulties of conducting such a scheme by'a central body 
representing so many various institutions, though they cannot be forecast 
exactly, are likely to be very great. In fact, we think that a careful 
study of the evidence submitted to Lord Southwark s Committee in 
regard to the working of the Railway Clearing System Fund shows that 
they might be insupei-able. 

383. It must further be borne in mind that thei-e will be diversity of 
interests not only among the constituent institutions but also in the member- 
ship. If the nursing staft's and the weekly wage staffs are to be provided 
for, it would be found that each of those bodies would present essential 
difterences from the salaried staffs in the matter of emoluments and 
salary progression, of ages and durations of service, and in particular of 
mtes of disablement and ultimate longevity. These differences would 
probably necessitate the formation of three separate funds, which would 
have to be kept distinct in every way, as indeed was contemplated by 
Mr. Manly (see sketch of his proposed scheme in Appendix V) 
The existence of these separate funds, each probably raising from time 
to time a good many problems calling for patient elucidation and 
settlement, would clearly add a good deal to the general difficulty and 
expense of administration as well as the personal work of the central 
committee. 



384. To these disadvantages must be added the consideration that 
where beneficiaries are called upon to contribute to a scheme, certain 
results have been shown by our review to follow almost inevitably. The 
contribut-ors usually gain a considerable voice in the management, and 
almost invariably develop differences of opinion as to the greater advan- 
tages supposed, probably with reason, to be enjoyed by the superior 
officers with the highest salaries.' On this last question we saw that much 
dissatisfaction had arisen in the ranks of the great Railway Companies' 
Funds. It was, in fact, one of the chief points Lord Southwark*s 
Committee was called on to investigate, and in the end the scales of 
pensions had to be defended, not on the ground of equity, but on the 
ground that the companies, in view of their considerable financial 
contributions, were entitled to impose somewhat arbitrary scales of 
benefits for the sake of general efficiency. 

385. When it is remembered that the l^ilway Funds represent 
by far the greatest development of mutual pension funds that has occurred 
in this country, it is a significant fact that it is always the companies, 
whom one would expect to be governed by a desire to avoid financial 
liability, who prefer the salary percenUige principle, notwithstanding the 
invariable losses and difficulties. The officers, on the other hand, or rather 
the great bulk of them excluding the higher officials, whofn one would 
expect to be in favour of pensions related to salary, would much prefer 
the money purchase principle, notwithstanding the difficulty of providing 
for disablement under that method. Their representatives, in the evidence 
submitted to Lord Southwark's Committee, return constantly to this 
point and attach more importance to the questions of security and equity 
inter se than to that of disablement |)ensions, which, they add. are often 
abused by putting on the fund men who have become inefficient tiirough 
their own vicious habits, or who are superfluous from the point of view of 
the management. One witness knew cases of favoured men on the funds 
who were " quite well to-day." These witnesses advocated that invalids 
should have the additional help they would need under the money 
purchase principle from a supplementary fund, which could be 
administered with a certain amount of discrimination. 

386. As regards the reasons why the railway companies have 
deliberately retained the salary percentage principle in face of the huge 
deficiencies that have developed, we need not pay undue attention to the 
suggestions of the lower grade men that, the funds being virtually 
managed by the higher officials, the latter naturally favour a system by 
which they benefit. The reasons for some such system in the interest of 
the railways themselves are very fully stated in the evidence of 
Mr. G. King, F.I.A., which we have reprinted in Appendix VI. Veiy 
similar views are expressed by Mr. McLauchlan (Cd. 5484, Q. 3352 and 
3378), who regards it as fundamental that the fund should be a good one 
for the purposes of the company, and who dwells on the importance of 
the higher officials and of being able to retain them or get rid of them as 
need may dictate. In the earlier days of the London and South Western 



:^..:^U 



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138 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



II! 



i; 



Railway Fund which (.w par. 222) had been started on the money 
purchase pnnciple, the following opinion was given bv three well-known 
axJtuanes, Messrs. Manly, King and R. P. Hardy, aft^r a comparison of 
the benefits with those of other Railway Funds:—''. ... the 
j' comparisons when intelligently examined are really in favour of your 
*• Fund. To the average man your Fund pi-ovides a larger pension than 
^ any other, and it is only in the case of a few highlv paid officials, who 
^ lorm a very small proportion of the whole, that your benefits are less. 
^^ We consider that your Fund, under existing conditions, does better in 
•* the aggregate for its members than any of the others referred to, and 
' that It IS only by giving undue prominence to the exceptional cases that 
any other view could prevail." (Cd. 5484, Q. 538.) The fact that, 
notwithstanding this very clear statement a^ to the respective benefits of 
the two principles, actuaries generally have supported the companies 
more recently in maintaining and extending the salary percentage principle 
is seen to rest more on considerations of general policy than of the 
individual equitable rights of different members ; and it is difficult to 
see how the principle could have survived at all in the case of these 
Funds without the enormous subventions for which the companies have 
made themselves responsible. 

387. It would be a great misfortune if such controversial questions 
as have arisen and persisted in connection with the Railway Funds in 
addition to financial difficulties, were to develop in connection with the 
Hospitals of London. We may add that the advocates of the salary 
percentage principle have not submitted to us a single case of an existing 
fund successfully working on that basis. In our opinion the solution of 
the problem, for the foregoing reasons as well ns those set forth in 
paragraph 245, must be sought in some other direction. 



Money purchase principle. 

388. We are thus led by a process of elimination to consider how 

far a scheme Used on the money pui-cha«e principle, i.e., under heading 

(h) of par. 124, would meet the conditions we have laid down. Our 

review of the different methods of applying the money purcha.se principle 

showed that the schemes may be divided into three categories viz 

those, like the Elementary School Teachers Deferred Annuity Fund and 

the Royal National Pension Fund for Nurses, where a mutual fund for 

deferred annuities only is set up ; those, like the New South Wales 

proposed scheme and Mr. Tinner's proposed scheme, where the mutual 

fund IS charged with disablement pensions or other benefits in addition 

to the defined superannuation annuities ; and those, like the Federated 

Superannuation System for Universities and the Scheme for Officers of 

Reformatoiy and Industrial Schools, where the contributions are applied 

to purchase definite annuity or death benefits from insurance companies 

whose machinery is used, as far as it will go, for the administration of 

the schemes. 



MUTUAL FUND ON MONEY PURCHASE PRINCIPLE. 139 



The Elementary School Teachers Deferred Annuity Fund. 

389. The Elementary School Teachers Deferred Annuity Fund is 
an interesting example of a mutual fund built up l)y the memljei-s' own 
contributions. As will have been seen from our description of it in para- 
graphs 253 to 257, it is conceived so strictly on the money purchase 
principle that each contribution of £3 (now increased to £3. 12s.) purchases 
a small part, varying of course with the present age, of the annuity. The 
ultimate benefit consists of the sum of these parts, however short the 
teaching career. The Fund is under the control of the 1 rcasury, which 
bears the cost of management, and all investments must l)e made in 
government securities. The annuities secured form one iX)rtion only of 
the ultimate provision to be made. There is no arrangement to pay 
any disablement allowances out of the fund. These are made from 
extraneous sources. Nor is there any death benefit whatever. According 
to the published scale of benefits {see Second Septennial Actuarial Report, 
1916, No. 42) an annual contribution of £3 from age 25 would seem to 
secure £32. 13s. 9d. per annum at age 05. Taking Table (b) of 
paragraph 261, it is found that under the Universities scheme £3 per 
annum would purchase a deferred annuity at 65, <lefinitely secureil, of 
£43. 18s. Od. per annum. In neither case would anything 1^ paid on death. 
In the event of withdrawal the plan of the Teachers Fund might possibly 
be more advantageous, as each contribution is held to purchase, once for all, 
its proper calculated part of the annuity ; whereas under the Universities 
plan each payment secures only an arithmetical proportionate part. For 
example, in the foregoing case, the £3 per annum would at the end of the 
first 20 years have purchased £22. 6s. 2d. (out of the total of £32. 13s. 9*1.) 
in the Teachers Fund; and £21. 19s. Od. (being twenty-fortieths of 
£43. 18s. Od.) in the insurance company. In the event of any future 
recourse to insurance companies, this alternative method of calculating 
the benefit on withdrawal is a point that should receive consideration. 
A sciile of benefits based on single premiums, like that of the 
Teachers Fund, might possibly be moi-e advantageous in practice 
than the equalized annual premiums more usually ^^uoted by insurance 
companies. 

390. It will Ije seen from the foregoing facts, that the Elementary 
Teachers Fund, though closely watched by the Government, ha** not 
so far been able to apportion annuities as lai-ge as could be obtaineti 
from good insurance companies. This result is, no doubt, due to 
the efforts that have been made to place security in the forefi-out, 
and to avoid the dangers that have been seen to produce deficiencies 
in so many cases of mutual funds. The calculations were, indeeil, 
made at 2 J per cent, interest. The general conclusion as regards 
this Fund is that it is in type too rigid to conform to all of the 
conditions laid down, and the actual results achieved, whether fix>m 
excess of caution or otherwise, are not so good as to suggest its l»eing 
taken as a model. 



140 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



•If 



The Royal National Pension Fund for Nurses. 

•^01. Our attention was natumlly claimed, at an early stage of our 
enquiry, by the Koyal National Pension Fund for Nurses. Its annuities 
are not built up by a succession of single premium payments, as in the 
case of the Elementary Teachers Fund, but are paid for by equalized 
annual or monthly premiums, following the ordinary type of an insurance 
company's conti-act. It will be seen from what we have written already 
(see pars. 293 to 802) that the Fund, so far as type is concerned, 
complies with most of the conditions we have laid down. Its contracts 
do not, however, provide for the contingency of disablement, and the 
death benefits are limited to the return of contributions with interest 
As male officers are admissible, we put the ciuestion to the Fund's 
witnesses whether its organization could be made available for Hospital 
officers genemlly. In Mr. King's opinion, an annuity of as much as £400 
or £500 per annum is, however, moi-e than the Fund should undertake. 
Possibly this opinion might be open to revision if a sufficient number 
were forthcoming to ensure a good average, but in any case it is an 
important indication, coming from an experienced actuary, of the need 
for caution in the management of a mutual annuity fund, even one so 
large and firmly established as the Royal National Pension Fund. 

392. The whole of Mr. King's evidence, in fact, pointed to the need 
for such caution, and fully accounted for the fact that the l)enefits for 
which the Royal Pension Fund has made itself responsible do riot compare 
very well with those guaranteed by strong insurance companies. Among 
the points to which Mr. King drew our attention is a remarkable and 
progressive lightness of mortality among the retired nurses. Taking the 
tables of government annuitants as a standard, the deaths among the 
retired nurses were in the first quinquennium only 72 per cent, of what 
he might have expected. In that case the numbers involved were few, 
but as numbers increased the longevity improved, for in the second 
quinquennium the actual deaths were only 63 per cent, of the expected, 
and in the third quinquennium barely 58 per cent. Another method of 
investigation, under which comparison is made with the standard table 
strictly according to each year of dumtion that has elapsed since the 
commencement of the annuity, gave even more striking results. 

393. The financial effect of this light mortality was explained 
also to us by Mr. King. The actual profit of the last quinquennium, 
arismg from excess of interest over the estimate and from working 
margms in the premiums, was £56,634. The net surplus, as we saw 
in paragraph 298, was £42,616, and the difference of £14 018 was 
caused by an actual loss under the heading of mortality, through ite 
being so much less than is reckoned on in the premiums. Hence if 
this actuary had not made at the outset cautious estimates as rega^s 
interest, the Fund would have been insolvent through the longevity of 
the annuitants. 



ROYAL NATIONAL PENSION FUND FOR NURSES. 



141 



394. We have seen, notably in the case of the London County 
Council Fund, but also in that of the Railway Clearing System 
Superannuation Fund as well as others, that this tendency is not limited to 
nui-ses. or even to females generally, and that serious deficiencies have 
arisen in mutual funds through the unexpected longevity of the annuitants. 
We put this ix)int to Mr. Tinner in connection with his proposed scheme, 
and he explained that his own rates of premium were based on the most 
modern experience of one or more pension funds, and that no similar, 
or at any mte eariy, deficiency was to Imj anticiptited from their use. 
Mr. King, however, submitted to us a stiitement he had put l^fore the 
Royal National Fund, in which he developed the view that the improved 
longevity of their annuitants was not a matter for surprise, inasmuch as 
there was in progress a very marked fall in the rate of mortality of the 
community generally. Mr. King says :— 

•• There are several points of time at wliich we can fix the rates. . . . VVe have 
•• the old English Life Ta»ile No. 6. based on the Censuses of 1891 and 1901 ; the Enalish 
♦•Life Table No. 7. based on the two Censuses of 1901 and 1911; the Insurance 
•• Commissioners* Table of 1909 ; and the Table based on the Census of 1911 alone. These 
" four tables show four distinct steps, without any break throughout life, of ^"ce^* 
•• moitaUty : and even comparing the figures for 1909 (the Insurance Commissioners lable) 
" and the figures for 1911 ^the last National Life Table)— even in those two years there is 
" a decided improvement. That, I think, is very remarkable, and it covers the whole of 
" England and Wales. It is not to be surprised at. therefore, that the mortality among 
*• nurses also shows a reduction. When I first investigated the Fund-a great many years 
" now— I found a verv light mortality; but that, I thought, was through the paucity of 
" numbers. That, however, cannot now be said, and the mortality is even lighter tlian it 
" was 20 or 25 years ago. I, tiierefoie, do not think that we are going to have any 
" improvement from the bonus point of view; on the contrary, it is likely to be rather 
" worse." 

Mr. King further informed us that, for the foregoing reasons, it might 
become necessary for the Royal National Fund to increase its rates of 
pi^emium in the futiu^. 

395. When we questioned Mr. King as to the possibility of 
creating a mutual fund for Hospitals, while he was of opinion that a central 
fund dealing with eariy retirements through disablement would not be 
practicable, he did not appear to rule out a fund of the type of the Royal 
National Pension Fund. He thought it would be very dangerous to start 
a fund to take nurses on a largo scale, and possibly the same would 
apply to male officers. It would need a large fund to make an average 
and stand the racket of the annuities. His own custom, exemplified 
in the case of the Royal National Pension Fund, had "always 
" been to provide that, at the time the annuity falls into possession, 
" there may be sufficient cash in hand to enable an annuity to be 
*' actually bought, in case of necessity, from some good company or from 
" the Government." 

396. Reviewing wbit we iiave written of the Royal National 
Fund, it would seem that it has special machinery for dealing with the 
case of nurses which must be borne in mind, so far at all events as they 
are concerned, should the scheme finally adopted contemplate a type of 
benefit which the Fund can provide. As to anything beyoinl that, how- 
ever, our conclusion is that, even if its machinery could l)e adapteil to 
embrace the larger purpose before us, and the Fund could see its way to 



<? 



I'f 



142 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



MR. tinner's proposed MUTUAL FUND. 



143 






i 

I 



iilt 



ii 



fWicept such large individual risks, the benefits it offers, being smaller than 
those to be obtained from insurance companies (ftee pars. 296 to 299), 
and its future prospects of bonuses, are not such as to suggest that the 
Hospitals could resort to it exclusively for their pensions. This view is 
strengthened by the increasing difficulty which, in our opinion, the Fund 
will experience in the future in competing with strong insurance companies. 

397. Nor can we see in the general construction of the Fund a type 
which could be recommended to the Hospitals for the model of a new 
institution. It is clear from the parliamentary returns under the 
Assurance Companies Act that, however good may be the profits on 
some classes of insurance business, the profits on annuity tran.sactions 
are extremely small. Indeed, not infrequently they result in loss. From 
the natui-e of the case, any new institution dealing only in the less 
profitable class of business would be handicapped from the outset. 
Assuming such a society to have been successfully started, the difficulties 
and expenses of organ i»it ion to have been provided for, and the financial 
risks to which every mutual fund is subject to l)e in a fair way to be 
faced, there would still remain the prospect of improved longevity in the 
community generally, to which Mr. King has drawn attention so forcibly 
and to which it does not seem possible at present to assign any limits! 
Mr. King may be unduly cautious, but when an actuary of his great 
experience suggests that, for such an institution, there is no method of 
attaining perfect security but to accumulate sufficient premiums to 
re-assure the risks with a good insurance company or the Government 
It IS equivalent to laying down the principle that \he rates of premium 
must be so safe that they cannot compete with established insurance 
companies. And inasmuch as the sole inducement to incur the risks of 
starting such a new institution on the mutual basis would be to obtain 
more favourable benefits from it, there seems to be no escape from the 
conclusion, confirmed as it is by the actual results of 25 years working of 
the lioyal National Pension Fund, that it would on the whole be much 
safer, and in the end probably moi-e profitable, to have direct recourse to 
insurance companies at the outset. 



The New South Wales proposed Scheme and Mr. Tinner's Scheme. 

398. Coming to the New South Wales proposed scheme and that 
put before us by Mr. T. Tinner, RI.A., we have already seen that they 
include a feature which tlistinguishes them from other applications of the 
money purchase principle which have come Injfore us. This is that the 
scale of premiums includes the estimated co.st of providing, in addition to 
superannuation, pensions in the event of disablement through a breakdown 
of health, and in the case of the New South Wales scheme other benefits 
besides. The actuaries who prepared the New South Wales scheme 
calculated and stated .separately (s^^e par. 308) the cost of the disablement 
benefit, which Mr. Tinner does not, but the fundamental principle is the 
same, viz., that the pensions granted on early retirement, and any other 



supplementary benefits, are all to be charged on a combined nmtual 
fund. The New South Wales scheme, however, presents certain 
controversial features (^ee pars. 309, 312, 316 and 349) which we have 
already found to be either inapplicable or unsuitable, and it will probably 
enjoy a State guarantee. It will be l>etter, therefore, to take Mr. Tiiuier s 
scheme as representative of the principle involved. 

399. In one main feature Mr. Tinner's scheme conforms to the 
type of the Elementary Teachers Deferred Annuity Fund, viz., that 
each contribution is regarded as a single premium which purchases a 
certain specified amount of annuity on retirement. It would, however, 
differ from the Teachers Fund in that (i) the amounts of contribution 
wouhl not be uniform, (ii) the investments would not be limited to 
government securities, (iii) the retirement may be ''early" in the event 
of incapacitation, and this is provided for by including its estimateil cost 
in the general calculation of premiums, (iv) the benefit does not enure, 
at any rate wholly, in the event of withdrawal though a certain benefit 
would enure, in the event of death, and (v) provision would have 
to be made for administration by a central governing body and for 
the expenses of management. A reference to the conditions we laid down 
in paragraph 378 shows that a fund of this type, provided it gives proper 
security for the pensions, complies with all of them, except that the death 
benefit is limited to the return of one-half of the contributions, viz., the 
member's own payments. We do not attach undue importance to the 
latter point, as the principle on which the scheme is constructed would 
lend itself, as in the case of the New South Wales scheme, to superimposing 
an increased death benefit by suitably decreasing other benefits or 
increasing the premiums. 

400. Mr. Tinner himself, in the evidence he gave us, attacheil great 
importance to the question of disablement (see pars. 314 and 321) and 
it is obviously a recommendation of his scheme, if his premises are sound, 
that it provides satisfactory allowances for members who break down in 
health. That this is so is seen by the numerous illustrations of the 
pensions that would be payable at various ages given in his own 
description of the scheme (see Appendix VIII). 

401. A mutual fund of this kind would be subject to the diffi- 
culties of central administration on which we have remarked at various 
points of our review (see pars. 150 and 245) and also to the financial 
and actuarial risks affecting all mutual funds alike. Taking first the 
former group of problems, we may say that we particularly questioned 
Mr. Tinner on this point, and he did not think that the administrative 
difficulties, including the allotment of the disablement pensions, would l^e 
insurmountable with goodwill all round. Mr. King, on the other hand 
(see par. 395), thought they would be. We asked Mr. Tinner if he was 
aware of the existence of any similar fund, serving the needs of a 
divei-sified Ixxly of institutions, and he knew of none other than the 
Railway Clearing System Superannuation Fund. The history we have 



144 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



I 



given of this Fund (m^ pars. 229 et seq.) shows that very great 
administrative difficulties have in fact arisen from time to time in 
connection with it; and as it is known that many of those difficulties were 
due to this pfirticular problem of disablement, which apparently was in 
some degree responsible for the financial insolvency that faced the Fund 
in 1903, it seems necessary that we should stop hei-e and summarize the 
views we have formed upon the fjuestions of principle involved in it. 



The general Problem of Disablement. 

402. As it is one of the objects of a pension scheme that there 
should no longer be any inducement to postpone retirement when a man 
ceases to be efficient, it is most desirable that a pension should be 
available, not only at a specifier! age, but also in the event of permanent 
loss of health before tliac age is reached. We have already made 
incidental references to the problems involved in the payment of 
disablement benefit, especially where the scheme includes the officers of 
many independent institutions (itee pars. l.')l, 22S, 240 and 245). 

403. We have seen, and more particularly in the case of the 
Railway Clearing System Fund, that there is not only the difficulty 
arising from the mere cost of the l)enefit in question, which must be 
provided at the expense of the normal pension benefit. There is also 
the difficulty arising from the fact that the date of retirement, and 
consequently the cost of the benefit, depends in each individual case on 
a decision involving the exercise of discretion, and the administrative 
question at once arises whether this discretion is to l)e exercised by the 
body responsible for the efficiency of the separate institution, or by the 
body responsible for the financial stability of the fedemted scheme. 

404. The problem in its first aspect, i.e., as it would affect a single 
employing unit, uncomplicated by the administrative problem involved in 
a federated scheme, is sufficiently serious. The promise of a disablement 
pension may involve a possible liability for an annuity extending over a 
much greater number of years than a superannuation pension, and payable 
to an officer the contril)utions in respect of whom have been accumulated 
for a coriespon(]ingIy shorter period. The second pari of the problem, 
namely, that which arises out of the administmtive difficulty incidental to 
a federated pension scheme, is still more serious. It may be illustrated 
by what has been known to happen even in the case of a pension scheme 
covering only the sepjirate departments of a single business concern. There 
is a natural tendency for each department to recommend the early retirement, 
at the expense of the central pension fund, of officials who are no longer 
fully efficient at their particular work, but are not actually di.sabled or 
incapable of other w(.rk. The pension fund is thus burdened not 
only with the absolutely inevitable percentage of cases of premature 
disablement, but also with liabilities which could have Ixjen avoided, and 
which probably would have been avoided, had the financial responsibility 



MR tinner's SCHEME AND THE PROBLEM OF DISABLEMENT. 



145 



for pensions rested on the same shoulders as the administmtive 
responsibility for the engagement and retirement of the officials in 
question. This tendency is naturally a greater difficulty in a fedemtcil 
scheme including independent institutions than in a scheme merely 
covering separate departments of one concern. The effect on the stability 
of the pension fund may be disastrous, unless, indeed, the normal pension 
benefits are reduced, or the contributions increased, to an extent that 
defeats the objects of the whole scheme. The history of the Railway 
dealing System Fund (see pars. 229 // se/f.) may be taken as throwing 
much light on the financial results of such forces as are here referreil to. 
In fact, the evidence before us would justify the conclusion that 
disablement pensions should not be included in a federated scheme in the 
absence of an extraneous financial guarantee. 

405. Therefore in any general scheme of Hospital pensions that 
includes disablement benefit, there must always arise the administrative 
question whether the decision as to retirement through ill-health is to rest 
with the Hospital Committee or with the central body responsible for the 
stability of the scheme. On the one hand, it may be urged that to decide 
the degree of disablement that would necessitate retirement requii-es 
knowledge of the officer and of the work which only the Hospital 
Committee can possess; and that the decision will directly affect the 
future efficiency of the Hospital, for which that Committee is responsible. 
On the other hand, if a pension fund is to be kept in a state of financial 
stability its lial)ilities must be capable of being calculated more or less 
approximately in advance, and this might prove to be almost impossible 
with claims that would depend on the exercise of discretion by individual 
Hospitals. While, therefore, in the case of a mutual fund as proposed by 
Mr. Tinner the grant of disablement pensions would rest with the central 
administrative body, we are driven to conclude, as regards the general 
principle, that the primary responsibility for granting the disablement 
benefit ought to rest with the individual Hospital. 



Mr. Tinner's Scheme resumed. 

406. Having arrived at this conclusion as to the proper location 
of the primary responsibility for disablement benefit, we will defer the 
further consideration of that problem, and now revert to the general 
consideration of Mr. Tinner's proposals. With regard to the financial and 
actuarial risks which affect all such mutual funds, and to which we have 
refened more particularly in paragraphs 127, 245, 381, and 391 et seq., much 
has been said already which need not lie repeated. Mr. Tinner s scheme, like 
other mutual schemes based on the money purchase plan, avoids many of 
the uncertain elements which enter into those based on salary peixrentage 
scales. So far as is possible consistently with the attainment of the end in 
view, every portion of the benefit is allotted strictly in accordance with 
its estimated cost ; but while the uncertain elements are thus reduced, 
they caimot, by the nature of the case, be entirely eliminated. Assuming 

K 



146 



GENEHAL CONCLUSIONS AND ALTERNATIVES. 



15' 



I; I' 

Ml 



'>r 






i ^ 



satisfactory arrangements to be made for the costs of mantigement, there 
would i-emain the financial risks, never absent and more likely to arise 
in a distant future than in the coming years, on account of which (see 
par. 280) the Public Trustee declined to undertake the management of a 
fund for the Reformatory and Industrial Schools ; and above all there would 
remain the actuarial risk of a steiidily improving longevity in the geneml 
community, which wo have just seen to hang over the prospects of all 
annuity funds (see pars. 30-* to :)97) like a cloud, which may, indeed, be 
only a menace, but the full import of which cannot be gauged at present. 

407. Mr. Tinner (see par. 394) did not himself attach so much impor- 
tance to this question of mortality as Mr. King, though he puts forward his 
whole scheme, so far as figures are concerned, in a purely tentative way, 
remarking that future actuarial investigations must decide whether, 
according to the actual experience and progress of the fund, the initial 
relation between contributions and benefits is justified or whether some 
revision in one or other may l)e necessary. Indeed, we think it a great 
advantage that Mr. Tinner should have presented his sketch of a mutual 
scheme frankly pointing out its more or less provisional nature ; for it is 
of the essence of a mutual scheme that the l^enefits of co-operation cannot 
be secured without the risks. This fact suggests that the differing 
degree of importance attached to the question of future mortality by 
Mr. King and Mr. Tinner may be moi-e apparent than real. Mr. King, 
in advising the Royal National Pension Fund, which is virtually a mutual 
insurance society for the grant of annuities, must be necessarily concerned 
principally for the integrity of its contracts. Mr. Tinner, on the other 
hand, suggests that the best if not the only way, for a body like the 
Hospital staff's, to derive the utmost advantage from the mutual system 
is not to endeavour to make the future perfectly safe, as would a 
strong insurance company, by abundant caution in the present, but 
within certain reasonable limits to leave the future benefits to be settled 
by events. 

408. We have seen so much reason for attaching weight to the 
question of absolute security that if the acceptability of Mr. Tinner's 
scheme were to depend alone on its provision of the ultimate pensions, 
we could not consider the possible advanUiges to be obtained from such a 
mutual scheme sufficiently great to be weighed against the risks and 
uncertainties. As regards the latter we found (see par. 187) that the 
deficiency in 1913 of £471,448 in the London County Council Fund and 
(see par. 236) that of £427,305 in 1910 in the liailway Clearing System 
Fund, were both due mainly to unexpected longevity among the 
pensioners. This evidence confirms the opinions of Mr. King as to the 
trend of recent mortality in the community generally, and is in our opinion 
conclusive as to the risks. There seems to be no way of providing against 
them other than the provision of ample margins in the premiums and 
valuation reserves. The reasoning of paragraphs 237 and 397 thus appears 
to us to be against a mutual annuity scheme of any type. The provision 
of adetjuate pensions on disablement is, however, important, and the 



MONEY PURCHASE PRINCIPLE : METHOD OK INSURANCE POLICIES. 147 

inclusion of this feature in Mr. Tinner's scheme so far removes it, notwith- 
standing the risks which we have seen to be attached to this benefit, from 
the category of ordinary mutual schemes on the money purchase principle 
as to suggest that a final conclusion on its merits may perhaps be 
postponed until we consider the remaining alternatives, and see whether 
the disablement benefit can be secured in any other or better way. 



Method of Insurance Policies. 

409. Of the remaining alternatives, consisting of methods of 
dealing direct with insurance companies, we will not dwell on the 
scheme for Officers of Reformatory and Industrial Schools, as it is 
limited entirely to superannuation without any option of a death lH?netit, 
and the terms agreed upon with the compjiny or companies have not yet 
been made public. The proposed scheme for Secondary School Teachers 
will be an important one, and likely to aftbixl valuable guidance if and 
when it takes effect, but the Report has not yet been acted upon. We 
will take the Universities scheme as best illustrating the advantages and 
disadvantages of recourse to insurance companies, and the most recent 
terms obtained from high class companies. 

410. In regard to any scheme based on insurance policies, it may 
be mentioned, among other things, 

(i) that there is a great saving in administrative lal)our and expense, 
(ii) that as there is no fund, there can be no loss on securities, 
(iii) that there is no need for actuarial valuations nor room for 
financial responsibility on the part of the institutions l>eyond the 
prescribed contributions, 
and (iv) that subject to acceptance of the defended pay principle (see 
pars. 270 and 412) the beneficiary on migration to any 
institution not within the scheme has the option of continuing 
the policy or policies either at his own expense or by arningement 
with his new employers. 

The Federated Superannuation System for Universities. 

411. From our detailed description of the Universities System 
(see pars. 258 to 271), it would seem that it complies with all the 
conditions laid down by us, subject to the following reservations : — 

(a) that the security for the pensions depends mainly on the solvency 

and partly on the future profits of the selected insurance 

companies. 
(h) that while the pensions, pure and simple, have l)een shown to 

be adequate, these should also he sufficient when supplemented 

by the death benefit. 
(c) that it does not provide a satisfactory pension in the event of 

disablement from a breakdown of health. 

K 2 



148 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



FEDERATED UNIVERSITIES SYSTEM : QUESTION OF SECURITY. 



149 



•I 
111 



412. Subject to these reservations, which call for consideration, this 
system is attractive. It is, however, important to rememljer that, as we 
have pointed out, it is based on the general fundamental principle that 
every year of service is strictly pensionable, carrying with it its due 
salary increment towards the old age provision, and that each such 
contribution, once set aside, enures for the benefit of the employee. 
In a scheme of this type the Hospital officer would thus retain the Inmefit 
of all past contributions if he changed his service to another Hospital 
within the scheme or to one outside it or left Hospitid service altogether. 
The system further combines simplicity of lociil administration with a 
minimimi amount of'central control. 



(a) The general Question of the Security oflFered by Insurance 

Companies. 

413. It seems scarcely necessary to discuss the question of the mere 
solvency of the great insurance companies. Though they are not 
supervised by the State, as in many other countries, they have worked 
since 1870 in the light of a statutory publicity ; and since that date there 
has been no case of failure of an important company. The security ottered 
for all contracts which are definitely guaranteed may l)e regarded as of a 
very high order ; and this seems to be the case more especially where the 
contract takes the form of, or in time becomes one for, payment of an 
annuity.* 

414. As regards the general conditions of prosperity, on which 
depend the future profits and bonuses, there is room for less certainty. 
We shall see presently that the profits of even the best selected companies 
may differ considerably, and the causes which have produced such 
dift'erences in the past will no doubt operate in future : and there may be 
yet other influences in the future that may affect all companies alike. All that 
can be said here on this question is that the companies are unlikely ever 
to have to meet a greater crisis of adverse influences than the War is now 
causing them to face. The arming of the manhood of the nation involves 
the payment of far more claims than were allowed for in the mortality 
calculations ; and on the financial side the increased income tax involves 
a heavy charge, while the fall in the values of all securities has necessitated 
the writing oft' of enormous sums to restore the worth of the 
depreciated investments. Insurance companies that are able to pass 
satisfactorily through such a severe ordeal as this will not only have 
earned the complete confidence of the public fi-om the point of view of 
mere security, but will be able to afford illustrations and expenences 
of what profits and bonuses may be obtained under the most 
adverse conditions. From the point of view of the question we 
are now discussing, therefore, no time could be more appropriate than 
the near future for the initiation of an insurance scheme ; and it 

In this connection we have printed in Appendix XII some extracts from an article 
on the suhject whkh appeared in the Economist of October 14th, 1916. 



may be concluded generally, with some confidence, that any prospects 
or estimates of future pensions based on the present experiences of the 
l>est companies would be likely to be fulfilled, and even improved upon, 
in years to come. 

415. We may perhaps add that there has been in recent years a 
great extension of the principle of insurance to all kinds of contingencies 
previously unthought of This fact has no very direct bearing on our present 
enquiry except in so far as it seems to indicate a growing tendency 
in modern life towards specialism, and towards leaving pi-ovision against 
uncertainties in the hands of those who specially study them, and ai-e thus 
l>est qualified to exercise foresight and resoui-ce in meeting the various 
unexpected incidences that must operate from time to time where 
the conditions of the future are unknown. 



(/>) The Adequacy of the Pensions under the Universities System. 

416. We took some pains to investigate {see pai-s. 2(>0 to 266) the 
pensions which can be purchased definitely under this plan for 10 per 
cent, of the salary, taking certain type cases ;.and we found that, speaking 
generally, the resulting benefits compaied very favourably with the old 
Civil Service terms, neither plan including any death benefit. We have 
also (see pars. 319 et seq.) given certain illustrations of the working of 
the system where the premiums for the deferred annuities ai-e returnable 
in the event of death or withdrawal. We may enquire briefly now 
what pensions would be secured under similar circumstances where the 
l>eneficiary avails himself of the maximum death benefit option. 

417. It may be explained here that contracts including death 
benefits, unlike those securing definite amounts of pension which are 
granted only upon a non -participating basis, ai-e granted by insurance 
companies on the profit sharing principle. It is well known that the 
profits of many of the older companies that have accumulated great 
financial resources are of a high order, and the Joint Committee which 
was responsible for framing the Universities scheme decided that their 
l>eneficiaries should have the option of effecting profit contracts and thus, 
if expectations based on past experience should not be falsified, of 
receiving larger ultimate benefits than could otherwise be secured for the 
same contributions. It is a disadvantage of this form of appl}ing the money 
purchase principle that any imrt of the benefit should l)e the subject of 
uncertainty ; but as such uncertainty applies only to the amount of the 
profits that might be available from time to time for division, and not 
in any way to the " sum assured " or fundamental part of the lienefit. 
it was decided that this consideration was outweighed by the pro- 
spective advantages. The Joint Committee, however, took pains, under 
expert advice, to select four companies with strong financial resources, 
and it is the figures given in that Committee's pamphlet for these 
companies, and based upon their past experience, to which we must 



150 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



\t 



have recourse for information as to the expected death benefits and 
alternative pensions. 

418. It is a cui-ious fiict that the results of four companies thus 
carefully selected are found to differ a good deal from one another. It 
does not follow that the company which has declared the largest profits 
in the past will always continue to do so, and we have therefore selected 
two sets of results for our estimates, those of a company we will call 
*' Office A " which on paper are the most attractive, and those of 
another, "Office B," which, though not quite so favourable, are such 
as a high-class company might perhaps be expected to maintain 
through bad times as well as good. We have then taken the same 
set of type cases of Hospital Officers (see Appendix X) that were used 
for our earlier calculations, and had estimates prepared of the benefits 
that would be secured in those cases under the conditions of the 
Universities System on the assumption, as l>efore, that the total 
contribution would be 10 per cent, of the salaries. For purposes of 
comparison we will set out the benefits which would be received- in 
respect of similar salaries from the State under the new Civil Service 
scale of 1909 (see par. 139). 

419. In the first place we give a Table to show the Ijenefit receivable 
in the event of death before the pension age. As this varies to some 
extent with the age at death, owing to the profits or " bonuses," we have 
selected for illustration the two ages 46 and 56 : — 



Death Benefits payable under the Universities System. 



Particulars of Type Cases. 


Amount of Death Benefit if Death occur at 


Age 46. 


Age 56. 


No. 


Age 

at 

entry. 


Final 
salary. 


Office 
A. 


Office 
B. 


Civil 

Service 

(New Scale), 


Office 
A. 


Office 
B. 


Civil 

Service 

(New Scale). 


I 

II 

III 


24 
20 
24 


£ 

625 

425 
325 


£ 

2,033 

1,383 
1,141 


£ 

1,758 

1,169 
963 


£ 
625 

325 

275 


£ 
2,603 

1,741 

1,420 


2,127 
1,389 
1,150 


£ 

625 

425 
325 



420. In the next Table will be found for the same type cases the 
amounts of the ultimate pension benefits ; and in the cjise of the C'ivil 
Service scheme the lump sums which would be payable on retirement 
under the Act of 1909 ai*e also shown. For facility of comparison, 
the second portion of the Table shows the pensions reduced to the 
common ratio that we have used previously, viz., the proportion of 
the final salary that is pi-ovided in pension in respect of each year 
of service : — 



federated universities system : i^UESTION OF ADEQUACY. 



151 






Pensions payable under the Universities System. 



(In addition to the full Death Benefits above illustrated.) 



Particulars of 


Amount of Ultimate Benefit 


Type Cases. 


At age 60. 


At age 65. 


No. 


Age at 
entry. 


Final 
salar>'. 


Office 

A 

Pension. 


Office 
B 

Pension. 


Civil Service 
New Scale. 


Office Office 
A B 


Civil Service 
New Scale. 


Pension. 


Cash. 


Pension. 


Pension. 


1 
Pension. Cash. 


I 
II 

in 


24 
20 
24 


£ 
625 

425 

325 


£ 

257 

174 
141 


£ 
224 

150 

121 


£ 

281 

213 
146 


£ 
750 

567 

390 


£ 
383 

259 

208 


£ 
342 

228 

185 


£ 
320 

239 

167 


£ 

8a4 

638 
444 





Proportion of Final Salary for each year of service 


Type 
Case 
No. 


At age 60. 


At age 65. 




Office A. 


Office B. 


Civil Service 
1909.* 


Office A. 


Office B. 


Civil Service 
1909. • 


I 

II 
III 


One-88th 
One-98th 
One-83rd 


One-lOOth 
One-113th 
One-97th 


One-80th 
Oue-80th 
One-80th 


One 67th 
One 74th 
One 64th 


One 75th 
One-84th 
One-72nd 


One-80th 
One-80th 
One-80th 



* With a cash payment in addition. 

421. It will be seen that if retirement takes place at age 60 the 
pensions provided by this plan, when supplemented by the death 
benefit, do not compare favourably with the Civil Service scale, though 
we could not call them inadequate. In fact a reference to the Table in 
paragraph 263 shows that they are not far removed from those provided in 
Mr. Manly 's scheme, and put forward by the Hospit^il Otticers Association. 
Where retirement is deferred until age 60 it is evident that the 
Universities plan provides benefits which counmre very well with those «»f 
the new Civil Service scale, and are much better than those of the 
Hospital Officers' scheme. It must not Ije overlooked that the new Civil 
Service plan provides, in addition to the j^ension, a substantial lump sum 
at the retiring age. On the other hand, the pensions under the Universities 
System are somewhat larger than the Civil Service scale at age 65 ; while 
the pre-pension death benefits have already l)een seen to Ikj very much 
larger. 

422. In connection with these death l)enetits we may mention that 
the foregoing results have been calculated on the assumption that, where 
retirement is deferred beyond age 00, the insurance company would 
continue to hold the maturing policy moneys and to allow interest thereon 
at the agreed rate; and also that the further contributions under the 



i 



152 



GENERAL CONCLUSIONS AND ALTEKNATIVE^i. 



scheme would likewise be held «aiid «accunuilated at interest until required 
for the pension. It follows from this that, in the event of detith 
l)etween the ages of GO and 05, ])efore retirement actually occurs, the 
whole of those accumulations would be {layable as a death Ijenefit, 
whereas under the new Civil Service scale no more than one year's salary 
would be paid in the event of death. At these ages this is an important 
consideration. 

4'2'3. The question of adequacy may be regarded from another point 
of view. We have seen that in any scheme based on the money purchase 
principle a postpcmement of the age of retirement, for a period during 
which the contributions are accumulating at interest, produces a 
rapid increase in the amount of pension. It may therefore be instructive 
to regard the problem from the point of view of the cjuestion, to what age 
must a man work in order to secure a certain amount of pension ? To 
answer this question we have taken two standards of the amount of 
pension to be aimed at, viz. : (a) the scale of pensions based on (irera(/e 
salary put forward by the officers themselves, with 40 years service, and 
(b) the old Civil Service scale based on Ji/ial sakry, also with 40 yeai-s 
service. The latter, of course, has always been regarded as a maximum. 
We have then applied the foregoing calculations to ascertain for each 
of the supposed type cases the numl)er of yciirs' service the officer must 
complete in order to arrive at an annuity equivalent to th« full two-thirds 
pension contemplated under each of the foregoing scales. The results are 
given in the following Table : — 

Ages to which Ketirement must be Deferred to secure certain 
Pensions under the Universities System. 

(After payment of maximum Death Benefits in case of ofl&cers previously deceased.) 





Age 

at 

entry. 


Age at retirement to secure two-thibds of 


Type 
Case 
No. 


AvERAUK Salary. 


Final Salary. 




Office A. 


Office B. 


Office A. 


Office B. 


I 


21 


63 


64 


66 


68 


II 


20 


60 


62 


66 


68 


UI 


24 


63 


64 


65 


67 



424. It will be seen that on the figures put forwaixl in the 
Universities System pamphlet the sciile of pensions approved as adequate 
by the ofticei-s themselves, and based on average salary, would l)e atUiined 
after 40 years service, or even less, and at a maximum age of 04, though 
possibly as early as 60. A further period of something like four or 
five years service would bring the pension up to the full two-thirds of the 



federated universities system : question of adequacy. 



ir>3 



final salary claimable under the old Civil Service scale, a scale which, 
unlike the new one, was limited to pension alone and conferred no death 
benefit such as is included in the Universities scheme. While we have 
stated these results for the sake of illustration, we must not l»e 
considered to suggest that an officer should be permitted to go on working 
until 67 or 68 merely for the sake of the larger pension. As a fact, the 
rapid improvement, produced by this application of the money purchase 
principle, in the amount of pension following on a postponement of the 
age of retirement, needs, as we have already remarked {see par. 26.)). to 
be closely watched and accentuates the need for prescribing an age for 
compulsory retirement in connection with that method. 

425. The alternative methods of arranging the benefits under the 
Universities System are so different from those of other pension .schemes, 
that it has been impossible for us to attempt anything like a final evaluation 
of the respective benefits so as to make the comparisons conclusive. We 
have had to content ourselves with illustrating the benefits themselves 
as clearly as possible. The latter being varied the occasions for these 
illustrations or provisional comparisons have arisen in different parts of 
this Report {see pars. 263, :U9, 419 and 420), and thus it msfy be 
convenient if we summarize here brieflv the figures of the Univei-sities 
System and one or two other schemes. We do so in the following 
Table, which is limited to the actual pensions that would 1k) payable in 
each of the Hospital type cases, other benefits being disregarded : — 

Short Summary of Pensions under the Universities System and 

other Plans. 



Type 
Case 
No. 



Amount of Pension commencing at 



Age 60. 



Age 65. 



Universities System. 



Deferred 
Annuity 
without 
Return. 



I 

II 

III 



£ 
336 

230 

185 



Deferred 
Annuity 

with 
Return. 



Endow- Hospital 
ment ^^'^^'"'^ 



Mr. 
Tinner's 



Universities System. 



Assurance Scheme. Scheme. 

with I 

Profits.* I 



Deferred 
Annuity 
without 
Return. 



; Endow- H<»P»t*l 
Deferred ; ment Officers 

Annuity Assurance Scheme. 
„^''»^ with ! 

^t"*^"- Profits." 



Mr. 

Tinnar's 
SchenM. 



8 



£ 
236 

157 

128 



£ 
240 

162 

131 



£ 
268 

171 

143 



£ 
250 

169 

136 



6 


7 


8 


9 


£ 

582 

1 


£ 
362 


£ 

362 


£ 
312 


400 


242 


'244 


184 


320 


196 


196 


165 



10 



£ 
355 

239 

193 



* In summarizing the table in paragraph 420 for purposes of columns 3 and 8 the results shown by 
Offices A and B have been averaged, so as to give their general effect in a single column for eskch 
pension age. 

^ 426. If we eliminate the results shown in columns 1 and 6, which 
are maximum pensions without any return on death and seldom chosen, 
it is remarkable that the amounts of pension arrived at by such different 



if 



154 



GENERAL CONCLl'SIONS AND ALTERNATIVES. 



methods should exhibit so much similarity. The results of the 
money purchase principle may be traced in comparing the figures of the 
Universities System and Mr. Tinner's scheme with those of the Hospital 
Officers scheme. At 60 the latter scale is i-ather l)etter; but about 61, as 
we have already mentioned (see pars. o20 and 421), the money purchase 
plan with a 10 per cent, contribution would be about the same, and at 
65 it is seen to be much better. Another notable feature is the marked 
similarity of the jjensions in columns 2 and 7 to those in columns 3 and 8. 
The former are those purchased by way of deferred annuity, carrying 
merely the return of contributions actually paid and interest thereon in 
case of death, whei-eas the latter are those provi<led by endowment 
assurances on the profit-sharing basis, carrying in addition very 
considerable benefits {^ee par. 419) in the event of death before the 
pension age. The explanation of this apparent paradox is given by 
Mr. F. L. Collins in his actuarial memorandum (see Appendix IX, pars. 6 
and 10). He there gives a Table showing that, with the help of the bonuses 
allotted out of profits, the best companies have been able, notwith- 
standing the heavy death benefits for which they have lieen liable during 
the currency of the policies, to return all contributions on maturity 
together with compound interest at from 3 to 4 per cent. As to why the 
companies are able to do this Mr. Collins can give no actuarial i*easons. 
His explanation is that the best companies to-day represent a 
" survival of the fittest " ; and that, unlike many less fortunate concerns 
which have disappeared in the past, such societies as those that grant 
contracts under the Universities System have in the past " accumulated 
" reserves far in excess of what is required for actual commitments." 

427. We arrive at the conclusion that this scheme, even under the 
options which provide maximum death benefits prior to the pension age, 
cannot be ruled out on the ground of inadequacy of the pensions received 
under it so long as the minimum contribution is 10 per cent, of the salary. 



(c) The insufficient Benefit on Disablement in the Universities System. 

428. We have already drawn attention to the fact (see par. 267) 
that the absence of an adequate provision on disablement is a marked 
disadvantage in the case of the Universities System. Not only does 
retirement before age 60 leave the officer without income for sustenance 
until that age, but if and when he attains 60 the pension entered upon 
must be for a reduced, and in cases of short service very much reduced, 
amount. The system itself is incapvble of l>eing amended to rectify this 
defect. We have already seen that the difficulty of settling whether and 
when an officer should be i-etired before the specified age, with the result 
of throwing a heiivy charge on the pension fund, is one of the principal 
obstacles to the smooth working of a mutual pension society : obviously 
it would be still more difficult to make any arrangement with an 
insurance company whereby the company would definitely accept liability 
for a contingency as to the happening of which the Hospital or a 



FEDERATED UNIVERSITIES SYSTEM : (QUESTION OF DISABLEMENT. 155 

superannuation committee' were to be the sole authority. On the other 
hand, if the company were to be the authority to decide whether an early 
retirement were justified by the officer's state of health, supposing a 
company would enter into such a contract, such a position would not suit 
the Hospital Committees. It is therefore necessary to consider whether 
there is any way of supplementing the scheme as at present organized, so 
as to cover the case of breakdown of health. 

4t{9. It is necessary first to understand clearly the natui-e of the 
hiatus to be filled, in order to make up for this defect of the scheme. 
We will first regard the problem as it presents itself automatically 
according to the conditions of the Universities System, and without 
paying attention, at this stage, to the officer's state of health. Under the 
scheme " if the annual pi*emium for any policy be not paid or credited 
" by the Institution to the Society on its due date, the assurance shall 
" cease to be in full force, but will i-emaiu in force as a paid-up policy 
*' for such proportion of the benefit as the numljer of annual premiums 
*' paid bears to the whole number originally payable." Thus the total 
benefit decided upon as appropriate in any case of disablement may 
be considered to consist of two parts, first the portion already provided 
by the scheme, Avhich is by no means negligible, and secondly the supple- 
mentary part still to be provided. The former consists of the amount of 
pension commencing at age 60, siiy jc per annmn, which is already paid 
for by the past contributions. If it were decided that a*, which would 
naturally be related, though not necessarily proportionate, to the years of 
past service, was a sufficient allowance, then the supplementary part yet to 
be provided would be jc per annum from the age of retirement until age 60. 
If, on the other hand, it were thought that, in view of the officers 
services, the pension should be increased from o! to x+p pier annum, 
then the supplement needed would be an annual payment of jr-l-j/ 
from the age of retirement until age 60, together with a continuing 
payment for the same period of such portion of the original insurance 
premium as would be necessary to provide the pension of i/ per annum 
after age 60 as an addition to the a; already jmid for. The Universities 
System contemplates that at age 60, when the contracts mature, the 
sums assured and the pensions guaranteed in respect of them are 
interchangeable. The sum assured in any individuiil case at the moment of 
disablement may thus be represented in symbols by A^-H Y+Z, of which 
X is the sum alreiidy secured by the past pjiyments, Y is the additional 
sum (if any) to be secured by further payments, and Z is the balance of 
the original amount assured which will be allowed to lapse. 

430. For an example we will take Type Case I (of Api^ndix X) 
and assume that a breakdown of health occurred at age 51, that is five 
years after the oflficer's salary had been raised from £500 to £600 per 
annum. If we adopt as a basis the results of Office A quoted in the 
foregoing Table (see par. 420) it w^ould seem that the contributions ah-eady 
made before that age would entitle this officer in any case to an allowance 
of alKmt £165 per annum, commencing at age 60, a sum of £1,668 being 



\li 



156 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



PROPOSED CENTRAL BODY FOR DISABLEMENT BENEFIT. 



i.y 



i f 
ji 

I 



payable in the event of death prior to that age. If that amount of })en8ion 
were considered sufficient to meet the case, it would be necessary to provide 
£165 per annum for the intervening period of years. If, however, it 
were desired that the officer should receive not less than, say, £20() per 
annum, then it would first be necessary to provide for 9 years so much 
of the original insurance premium as would Ije required to purchase the 
additional £35 per annum after age 60. This sum would be about 
£20, and, when added to the £200, would make a total amount of £220 
per annum to be provided for the 9 years. 

431. If we adopt the less optimistic figures of Office B, the contri- 
butions already made would entitle the officer to about £148 per annum 
on attainment of 60, the sum assured payable in the event of previous 
death being £1,471. In this case £52 per annum must be provided after 60 
to raise the total ultimate pension to £200 per annum. The temporary 
additional cost of this would be about £40 per annum, which, added to 
the £200 immediate pension, would make a total of about £240 per 
annum to be provided for the 9 years prior to attainment of age 60. 

432. By the terms of the policies the pension of £200 would be 
supplemented by a total death benefit, covering the intervening 9 years 
before age 60, of £1,862 rising to £2,064 in the case of Office A, and 
£1,826 rising to £1,986 in the case of Office B. In the case of a man 
suffering from a breakdown of health this would be an important 
consideration ; but the death benefits properly purchasable by the 
contributions made by or on behalf of the officer during the pensionable 
years of service are those stated in the preceding paragraphs, and it does 
not follow that his estate should benefit to this increased extent. The 
death benefit would expire on the attainment of age 60, and become 
mei-ged in the annuity thereafter payable. In the event of death ensuing 
thereupon, before the annuity had l)een enjoyed for many years, the loss 
to the estate would be considerable, but this is a feature which* runs 
through the whole scheme and which we have discussed elsewhere 
(see par. 339). 

433. The foregoing method of viewing the disablement problem, 
based on the automatic regulations governing the insurance contracts, 
disregards the state of health of the disabled officers. In connection with 
the New Zealand Funds (ftee par. 215) we noted the fact, confirmed by all 
other published experiences, that pensioners retired through ill-health are 
subject to a rate of mortality higher than the average. Calculations 
connected with insurance contmcts are usually based on the assumption 
that the lives are healthy, and it by no means follows that arrangements 
for the continuance or discontinuance of policies which might be sound 
and equitable on that assumption are necessarily the best where the lives 
have deteriorated. Hence there are broader aspects of the question of 
providing these supplementary pensions under the Universities System 
which call for further consideration, and which will he discussed presently 
(see pars. 441 et seq.) 



434. For the moment it is sufficient to point out that it would 
not be necessary, though we shall show that it might be desirable, for 
the Hospitals to assume liability for disablement pensions during the 
whole of life ; but that at the woi-st the problem of financing any 
case of disablement is capable of being brought within managealile 
maximum limits. If it were to be decided that a scheme based on 
insurance policies were the most suitable for the Hospitals in all 
other respects, it would be unfortunate if it were to prove unacceptable 
through the existence of this defect. The question we have already 
discussed in the abstract is thus directly raised in a concrete form. It is 
whether the lial)ility for supplementing the disablement pensions might 
not be regarded as a matter apart altogether from the superannuation, 
and be accepted by the individual Hospitals concerned in their capacity 
of employers. 

The general Problem of Disablement resumed. 

435. We have already arrived at the conclusion on the question 
of general principle (i<ee par. 405) that the primary responsibility for 
granting disablement benefit ought to rest on the individual Hospital 
concerned. We also saw in Part I of this Report that the Hospitals have 
already given disablement pensions in many cases (see pars. 16 and 20). 
We were not able to say that the provision already made in this way is 
adequate, but we may take the fact as evidence that the Hospitals, in 
addition to providing superannuation pensions to a considerable though 
insufficient extent, have in fact l>een able to deal to a certain degree 
with the difficulty caused by premature disablement. We are, therefore, 
of opinion that the individual institutions concerned, might, if it were 
decided to provide ordinary pensions under an insurance companies 
scheme, continue to deal with disablement. In doing so they would be 
acting in accordance with the principle which we have found, after a general 
consideration of all the circumstances, to be the only logical solution of 
the problem. Having thus settled the question that the primarj- 
responsibility for disablement pensions should rest in practice on the 
Hospitals, it would be a proper subject for further investigation to enquire 
into the best method of meeting this liability, and the possibility of helping 
them to do so. • 



Suggested Central Body to supplement Disablement Pensions. 

436. The need for some such help arises because the financial 
burden might be too heavy for the individual Hospital. There would be 
the greater risk of this because the Hospitals, by hypothesis, would have 
assumed already their share of the burden of providing in advance for the 
superannuation claims of the whole of their stalls in respect of future 
service. We have pointed out (see par. 434) that the liability for 
disablement is not an unlimited one ; and we think that if some help 
could be given to the Hospitals they would be not unwilling to assume 



158 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



COST OF DISABLEMENT BENEFIT. 



159 



I 
I 



\h 



i 




'i! 



generally an obligation which has already been accepted by so many, 
and thus retain the determining voice in a matter so closely affecting 
their etficiency. 

437. For this purpose some centiul organization would be necessary, 
l)ut it must be a body possessing the confidence of the Hospitals. We 
cfmtemplate that it would in effect l>e an association of the Hospitals 
themselves, who would be acting in combination for this particular 
purpose. It would presumably receive extraneous financial support by way 
of donations or subventions. It would set up the disablement liabilities 
and itself provide for such part of them as its funds might justify, the 
balance of the necessary provision in advance being annually discharged 
by the Hospitals themselves by a uniform or general levy to \ye made on 
defined principles. Before we close our Report we shall recommend that, 
in the event of our proposals for the separate treatment of disablement 
taking pi-actical shape, the King's Fund should give its support to them ; 
and the Executive Committee might even see its way to advise a money 
contribution towards the cost of them. We do not, however, contemplate 
that the King's Fund would assume any responsibility, financial or moral, for 
the proceedings of the As.sociated Hospitals in the matter of disablement ; 
and when in future we spcvik of the proposed " central body " we mean 
an organization of the Hospitals acting within the limits here outlined. 

438. As regards the difticulty, to which we have more than once 
adverted, as to whether the Hospitals would submit such retirements to 
the approval of a centml body, we do not think it would apply in this case. 
In the fii-st place, the central body concerned would be fundamentally 
ancillary to the work of the Hospitals, anxious to promote their 
efficiency, and compo.sed of men, or men and women, who would l)e 
representatives of the Hospitals themselves. Secondly, it would not 
be responsible for the solvency of the whole scheme as regards 
ordinary superannuation, and would be thus, financially speaking, 
more free to consider cases on their merits. Thiitlly, the amount 
involved in any case would not l)e the whole cost of the pension, and in 
many cases an amount not in itself of great importance, as to which 
difference of opinion would l)e unlikely to occur. Lastly, it woidd always 
be within,the discretion of the Hospital to deal itself with any individual 
case, subject to the approval of the central body, if it desired to do so 
owing to reasons other than a strict breakdown of health being involved 
in the retirement. It will l,e remembered (f<ee par. 38;>) that some such 
solution of the disablement difficidty was .strongly advocated on its own 
merits by representative railway officials, in preference to the existing 
system of .salary percentage pensions of which they had actual experience. 



The Cost of Disablement Pensions. 

439. Having thus seen that abstract considerations point to the 
desirability of regarding disablement as a separate question, and that in 



the case of a scheme of the Universities type practiced considerations 
render that course a necessity, we thought it might be convenient if, 
before committing ourselves to any formal recommendation on the subject, 
we put together such facts illustrating the rates of disablement as have 
come before us in the course of our enquiiy, and as seem to thi-ow any 
light on the actual magnitude of the financial considerations involve<l 
in any separate provision for that contingency. In order not to interrupt 
the main argument of this Keport the results are stated separately in 
Appendix XIII. 

440. It will l)e seen from a perusal of that Appendix that we 
have been able to throw a certain amount of light on the cost t>f 
disablement, so far at all events as it may be regarded relatively to the 
cost of pensions as a whole. If, as appears from Sir George Haixly's 
analysis of the Railway Funds' experiences, pensions on a scjile averaging 
rather l)etter than a sixtieth of the average salary for each year of service 
can be secured at a cost of 5 per cent, of the salaries provided in advance, 
then the disablement pensions alone are estimated to repre.sent from 1 2 to 
19 per cent, of the total pensions, according to the different experiences of 
the Railways. If tlie cost of disablement provided in advance were to vary 
with the cost, similarly calculated, of total pensions, an assumption which 
we have not established and which very possibly results in an under- 
statement, then the separate cost of disablement in the Railway Funds 
could be put at from 12 to 19 per cent, of the contribution. As this is 
£5, or 100 shillings, for every £100 of salary the result may be stated as 
12s. to 19s. percent, of the annual salaries. In other woi-ds, the cost 
of disablement may be reckoned roughly at about one per cent, of the 
salaries, or one-fifth of the whole cost of pensions ; and taking the .salary 
list of the Hospitals at £300,000 {see par. 372), and leaving past service to 
be dealt with as a separate problem, it seems that an annual sum of 
something like £3,000, starting from the present time, might according 
to railway experience be sufficient to provide in advance the cost of 
disablement pensions in respect of future service on a scale much the 
same as that put forward in the Hospital Officers' own scheme. 
Sir George Hardy's calculations appear to make no provision, however, 
for expenses nor for the contingencies, such as lo.sses on investments and 
variations in the rates of retirement and mortality, which have l)een seen 
to falsify predictions frequently in the case of mutual funds. For these 
a margin would clearly be necessiiry. Also they assume that much of 
the profit from withdrawals is pooled for the benefit of the funds. 



The Universities System resumed. 

441. Having arrived at this very rough method of estimating the 
total cost of providing disablement pensions on a typical .sciUe we 
submitted an enquiry to Mr. F. L. Collins, F.I. A. (see par. 319), as to 
whether he could state approximately the percentage of the total cost of 



160 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



EXTRA VALUE OF DEATH BENEFIT ON DISABLED LIVES. 



161 



\ti 



1 






1 



I 



li 



s 



( 



disablement which would be represented by the pensions already secured 
under the Universities System on a breakdown of health, so as to estimate 
the cost of the supplementary balance still to be made good for proper 
disablement allowances. Mr. Collins was asked further to what extent the 
result would be affected if the insurance policies, where such have been 
chosen, were to he maintained in force as suggested in paragraph 9 of his 
Memorandum. In response to this enquiry, Mr. Collins made some 
calculations and arrived at what seemed to be, at first view, a some- 
what suiprising result. In the case of a scheme based entirely upon 
Endowment Assumnce policies, provided all are maintained until maturity, 
such supplementary balance need not cost anything at all. This result 
appeared to be so interesting that we asked Mr. Collins to state the case 
in writing, and it will be found as an addendum to his Memorandum 
{see Appendix IX, par. 11). 

442. In considering Mr. Collins's conclusion, it is necessary first to 
understand the conditions of the problem as he approached it. The 
statistics of early pensioners in existing funds show that the rate of 
mortality among them is considerably higher than among the whole body 
of officers, and it follows that insurance policies already in existence on a 
body of such lives would l»e more valuable than policies on average lives. 
Mr. Collins therefore proceeded on the assumption that such policies 
ought not to be surrendered, nor any portion of them, in the manner 
contemplated by the Universities scheme (see pars. 428 et seq.), and that 
they could then be valued, for the proposed purpose, by a table importing 
the higher rate of mortality applicable to such lives. He then ascertains 
what is the cost of providing annuities on such deteriorated lives, and 
arrives at the conclusion that the values of the policies in hand, so 
arrived at, would be sufficient, and in most cases more than sufficient, 
to provide disablement pen.sions on scales generally accepted. In other 
words, it is assumed that a central body would take over and " nurse " 
the policies in all disfiblement cases, and would pay the pensions 
contemplated, as well as the premiums for maintaining the policies fully in 
force ; and the conclusion is that it would be able in the end to recoup 
itself for this outlay, together with accunmlated interest, out of the 
proceeds of the policies as and when they became payable. Mr. Collins's 
conclusion is l)ased also, it will l>e noticed, on the further assumptions 
that the supposed scheme is in full working onler and that insurance 
policies would be existing in all cases. 

443. It is necessary to point out that these assumptions do not 
accord with actual practice. In the first place, it will have been 
noticed that we ourselves approached the problem by assuming (see 
par. 420) that in the event of a l^eneficiary becoming disabled he 
would retain his right to have his policies maintained in force for 
his own benefit for such a proportionate part of the sum assured as 
is represented by the past contributions, so that his estate, and his 
dependants, might benefit thereby in the event of his death, though not, 
of course, to the fidl extent that they would have benefited if he had 



been able to maintain the policies in their entirety. In the .second place* 
we have already noticed (see par. WoJ) that in the case of the Universities 
scheme only about one half of the contracts effected have l)een 
Endowment Assurances. The other half consisted of Deferred Annuities 
of different kinds, in which cases there would be no death l>enefit 
possessing an increased value to assist in pioviding the dis;iblement 
benefit. The latter question is taken up at paragraph 461. 

444. As regards the first question, it is, as we have already .said, 
a special provision in the prospectus describing the Universities System 
that in the event of payment of the premium being discontinued the 
contract shall remain in force but only for such a reduced proportion of 
the original l)enefit as is represented by the premiums already pjiid. The 
remainder of the sum assured is allowed to lapse. That being the form and 
extent of the benefit contemplated by the scheme in the event of dissible- 
ment, we sturted from that point and showed how a supplementiiry l>enetit 
nn'ght be built upon that foundation. Mr. Collins, however, i-egarding 
the matter from an actuarial point of view and entirely in the aggregate, 
shows that when a man breaks down in health he is, as it were, at a 
half-way house towards death, with the result that a contract payable at 
his death becomes immediately of a much greater value. If, therefore, 
all the policies in the Universities System were to be discontinuetl 
on a breakdown in health, and all those on healthy lives maintained, 
the insurance companies would be reaping an unexpected profit. An 
insurance company reckons that only policies on good lives will l^e dis- 
continued and is quite alive to the fact that policies on bad lives may and 
prol)ably will be maintained against it. Quite independently, therefore, 
of the question whether any and if so what proportion of the original 
death benefit should be reserved for the benefit of the life assured and 
his dependants, it seems clear that, looking at the matter in the aggregate 
and purely as a financial proposition, all such policies should be maintained 
fully in force until their maturity ; and if no means exist for " nursing " 
them, it seems desimble that some machinery for doing so should be 
devised. 

445. While it thus seems to be established that the procedure out- 
lined by us in paragraphs 429 et seq., and suggested by the provisions of the 
Universities scheme itself, ought not to be followed in actual practice, we 
are of opinion, in view of the arguments summarized in paragraph :>37, 
that the [Particular provision of that .scheme which preserves to the 
beneficiary the full measure of death benefit purchased by the past 
contributions is a most valuable one. Its value is emphasized from the 
point of view of the dependants by the state of health of the pensioner. 
This consideration suggested a further investigation on the lines initiate<i 
by Mr. Collins but liased on the maintenance of this practice. In this 
way the application of the proposed principle of maintaining the policies 
for provision of pensions would be limited to the part not already 
hypothecated for the death benefit of the assured member himself; that is 
to the part that would otherwise have been allowed to lapse. 

L 



!■ 



162 



GENEKAL CONCLUSIONS AND ALTERNATIVES. 



440. At this stage it became necessary to define more clearly what 
would be a suitable standard of disablement pensions to l)e gmfted on 
the Univei-sities System. Mr. Tinner (see par. 400) has given much 
attention to the subject of disablement, and it was thus natural that 
Mr. Collins {see Appendix IX, par. 1 1 ) should compare his own results 
with the pensions that would be provided by Mr. Tinner's method when 
the pen.sion age is 60. These, as calculated by Mr. Tinner him.self 
with special reference to our own Hospital type cases (see Appendix VIII, 
Table VI), are illustrated in the following table, in which are likewise 
given the corresponding specimens based on the scale proposed by the 
Hospital Officers Association. 



Specimen Disablement Pensions. 



Duration 


Type Case I. 
(Age at entry 24.) 


Type Case II. 
(Age at entry ao.) 


Type Case III. 
(Age at entry 34.) 


of 
Service. 


IloRpital 

Officers 

Scheme. 


Proposed 
Standard scale 
(Mr. Tinner's 

method). 


Hospital 

Officers 

Scheme. 


Proposed 
Standard scale 
(Mr. Tinner's 

method). 


Hospital 
Officers 
Scheme. 


Proposed 
Standard scale 
(Mr. Tinner's 

method). 


10 

15 
20 
25 
30 


£ s. d. 
31 14 

62 10 

104 12 

153 6 

205 8 


£ 8. d. 
49 10 

88 

132 3 

174 15 

212 18 


£ s. d. 
20 14 

35 8 

53 4 

74 8 

103 4 


£ 8. d. 
37 9 

58 10 

79 8 

100 10 

124 15 


£ 8. d. 
22 10 

39 12 

60 16 

83 16 

110 


£ 8. d. 

35 2 
56 17 
77 16 
97 17 
117 1 



Note.— The Hospital Officers proposed pensions were based on siKtioths of the average salary throughout 
service. The proposed scale arrived at by Mr. Tinner's money purchase method is based on a 'oontribution 
of 10 per cent, of the sjUary, with 60 as the superannuation age. 

447. As the pensions thus seen to be provided by Mr. Tinner's 
method, when the contribution is 10 per cent, of the salary, are distinctly 
better as a whole than those suggested by the Hospital Officers, and 
appear to be suitable in themselves, we suggested to Mr. Collins that 
they should be made the standard of his comparisons and be adopted 
generally as a basis for any calculations of the cost of supplementing the 
provision under the Universities System. We shall refer hereafter to 
this scale of disablement pensions as the proposed " standard scale." 

448. Using this scale and as the result of further calculations, 
which have been included in a supplementary addendum to his 
Memorandum (see Appendix IX, pars. 13 ^nd 14), Mr. Collins arrived 
at the conclusion that, limited in operation as laid down in par. 445, the 
policies would suffice, by the almost automatic process of maintaining 
them until maturity, to provide something like two-thirds of the total 
disablement pensions. Mr. Collins's conclusion, is based, it will be noticed, 
on the assumption that " the experience will conform to that of the 
" Elementary School Teachers (males) both as regards the number of 
" disablements, and also as regards the average duration of life in such 



net COST OF DISABLEMENT BENEFIT TO CENTItAL BODY. 



\*i3 



** cases." 



Thus the proportion of the value of the policies retained 
for the benefit of the assured is about one-third, and that would l>e the 
proportion of the whole amount of the disablement pensions to In? made 
good by the proposed central body. 



The Net Cost falling on the proposed Central Bo<ly. 

449. In making our own endeavour to arrive at the actual present 
cost of disablement, we first ascertained the proportion that disablement 
pensions in Railway services, as paid in arrear, form of the total pensions, 
and then assumed provisionally (see pir. 440) that a similar pi-oportion 
would hold good of cost provided in advance when measured as a 
percentage of the salary. Mr. Collins's methods of calculation did not 
satisfy him that he could apply any such assumption to the one-third 
of the disablement pensions that, according to his estimate, would have to 
be made good by the proposed central body. His methods did not 
even provide any measure either of the total amounts to he [»ayab1e 
ultimately for disablement, or of the total cost of disablement reckoned in 
advance. As we expressed a wish to have the future expenditure of the 
proposed central body translate*! into absolute amounts, and more 
particularly, if possible, into terms of present cost, Mr. (Collins was gotxl 
enough to undertake a fresh set of calculations in which he started from 
first principles and essayed to estimate synthetically the present cost of 
disablement in the case of the Hospital type cases. 



450. Starting from the proposed standard scale as showing the 
pensions to l^e provided, Mr. Collins again turned for guidance as to the 
rates of disablement and mortality to the experience of the Elementary 
School Teachers. In view of the facts we have cited,* it is not certain that 
the data thus used by Mr. C>ollins would necessarily measure the maximum 
likely cost. He arrived at the conclusion (see Appendix IX, par. 15) that 
the cost in advance of disablement, viewed as a percentage of the salaries 
of a stafFentering at young ages, would work out at about 17s. od. per cent , 
which, for working purposes, he called one per cent, of the salaries. On 
the other hand, Mr. Tinner, who has also helped us in this matter (see 
Appendix VIII, Addendum), has similarly calculated the cost of the 
proposed standard scale of pensions for our Hospital Type Cases I and II, 
on the basis of the rates of disablement disclosed in his own Table. His 
conclusion is that at age 25 the cost must be put at 21 per cent, of the 
contribution, which is itself 10 per cent, of the salary. Thus for a stall' 
recruited young he estimates the cost at about £2 2s. per cent, uf the 
current salaries, compared with Mr. Collins's 17s. od. The marked 
difference in these results, arrived at by similar processes, would seem to 
be wholly due to the different experiences on which were liasetl the 
standard tables respectively used. 



* See par. 147 for heavy disablement rates in the Civil Service ; also Appendix XII, 
par. 3, for the heavy rates shown by Mr. Tinner's Table. 

L 2 



164 



r.ENERAL CONCLUSIONS AND ALTERNATIVES. 



NET COST OF DISABLEMENT BENEFIT TO CENTRAL BODV. 



165 



M 



I ii 



4ol. As regards the relation of these results to the cost of from 
l-s to 19s. per cent, which we ourselves arrived at {^e ijar. 440) by a 
merely approximate process and Imed on railway experience' we 
remarked that Sir (ieorge Haniy's Riilway. Tables countc.1 on a certain 
amount of pi-ofit falling l«ck to the fun.l on the with.lmwal of meml,ers 
As the proposed central IkhIv would rec-eive no individual contributions 
from members, and therefore would return nothing in respect of 
withdmwmg memlK>rs. the .wssun.ptions umlerlying our estin.ate of 
about 1 per cent, are in this particular respect closer to the facts than 
the estmmtes of Mr. Collins an.l Mr. Tinner, who In.th disreganl 
withdrawals. When allowance is n.ade in their estimates for this 
element our 1 per cent. I^vsed on the Railway Tables, and on a pension 
scale mther less than our proposed standanl scale illustmted in 
paragraph 446, is found to be about midway between the other two. 

4.V2. The two actuaries have been goofl enough to confer on this 
questum. Ihey agree that the differences between them are due to the 
differences of the standard tables employed ; they agree that, even if the 
higher cost of disablement acconling to Mr. Tinner's Table cannot be 
disregarded, some deduction may properly be made for the withdmwal 
element ; and they agree in thinking that one and a-half per cent, of the 
current .saUrics might be mlopted, at all events pmvisionally, as the cost 
m advance of the standai-d disablement pensions. 

. /°^- _,The questions involved in this conclusion are briefly discussed 
m Appendix XIII (,.« pa,u 10 et ,«/.), where we have given reasons for 
thinking that if the centml body were to reckon the total cost of the 
disablement at the rate approved by Messrs. Tinner and Collins it would 
hnd Itself with a satisfactory margin for contingencies. We shall therefore 
.ncrea.se the amounts estimated for in Mr. Collins's memomndum bv 
o<. per cent, wherever necessary. Thus, if a scheme were to start only 
with future appointments, as in the case of the Universities System the 
annual amount to be set a.side for disablement would commence wi'th a 
small sum and grow until it rem;hed a maximum of £4,;-i00 in respect of 
our supposed salaiy list of £300,000. To the amount so arrived at 

wo^d be therefore the estimated net cost to be provided in advance 
by the proposed central body. 

454. This method of stating the provision to be made in advance 

dating from the initiation of a scheme supposes, however, that the existing 

staffs are not to be included in any way. whei-eas we have proposed 

{see par. 378) that they should be included for such benefits aT can be 

purchased with a contribution at the prescribed mte in respect of all 

future service. It wa^, therefore, necessary for Mr. Collins to consider 

the cost of the proposed scale of disablement pensions in rt^spect of the 

future service of an existing staff Taking certain ages and calculating 

the percentage of future salary required to provide the cost of the 

disablement pensions in respect of future .service in the type cases he 



found it possible to ascertain how the varying durations of past senile 
at the date of the inception of a scheme would affect the matter. He 
arrived at the conchision (see Appendix IX, par. 17) that the cost 
relatively to the salary would diminish with the age, being still about 
178. per cent, of the salary after 10 years service, but falling to 15s. 
per cent, after 20 years service. From this it would appear that the 
existing staifs of the Hospitals could be included in a new scheme in 
respect of future service without aflfecting the estimates so far as the 
total cost of disablement is concerned. In other words, on a salary list 
of £300,000 the total cost of disablement may be taken at about £4,500 
per annum provided in advance whether (a) the scheme has attained 
equilibrium after being in existence for the whole service of the existing 
staffs, or whether (b) it be one newly applied to them in respect only of 
future service 



455. Mr. Collins then proceeds (see Appendix IX, par. 18) to 
consider whether his estimate of one-thiixi of the cost of disablement 
provided in advance (n^e par. 453), as being the net amount falling on the 
proposed central l)ody, would apply likewise to the foregoing estimate for 
an existing staff. Here the two cases (a) and (b) we have just mentioned 
must be differentiated. We have already said it would so apply to 
case (a), that is to a new scheme provided it were to begin only with all new 
appointments. This was the method of initiating the Universities Scheme 
and was the general basis on which Mr. Collins built his estimate of the 
results of taking over all policies on disabled lives. Applying the 
proposed method, however, to case (b), viz., to an existing staff in the 
manner we ourselves propose for the Hospitals, Mr. Collins shows that 
the causes which in the case of the Universities method reduce the net 
cost of disablement by two-thirds would cease in part to operate here, and 
that an exact estimate of the immediate net cost could not he formed 
without special calculations l>ased on statistical details of the staffs. He 
estimates, however, that while the net cost of our proposals to the central 
body administering the disablement pensions ought not to 'reach anything 
like the total cost of £4,500 per annum even at the outset, it would 
gradually fall to £1,500 as the older members of the exi.sting staffs 
become eliminated. 

456. Though the conseijuence of adopting our proposiils to include 
the existing staffs in respect of future service would thus be to make 
more expensive the administration of the disablement pensions, we think 
it would be unwise not to face this question. In a service where the 
grant of pensions has been irregular in the past, the introduction of 
machinery to assist retirements on disablement would probably lie followed 
by a good many applications, not only in cases of real brcfikdown, but 
where in boixier line cases the efficiency of the Hospitals would be 
improved by the retirements. It is thus difficult to find any suitable 
basis for actuarial estimates of the cost during the first few yeais of the 
scheme. 



« 



166 



GENEKAL CONCLUSIONS AND ALTERNATIVES. 



FURTHER QUESTIONS ARISING ON DISABLEMENT. 



167 



457. l^astly, we asked Mr. Collins whether, in the event of its 
being possible to include the existing statfs in i-e^pect of pjist service 
(itee par. 378-x.), his calculations could throw any light on the relative 
cost of disablement pensions in respect of past service. The absence of 
exact statistics of the existing staffs, which met us (j<^« par. 113) in our 
efforts to test the adequacy of pensions alretidy granted by the Hospitals 
and more particularly (tfee par. 364) in our endeavours to fix the cost of 
including the existing statfs for ordinary superannuation, made impossible 
any calculations of the cost of disablement separately. Mr. Collins has, 
however [see Appendix IX, pars. 20 & 21) pui-sued the method of induction 
from type cases on which his other conclusions as to disablement are 
based, and arrived at the result (already quoted, see par. 364), that in the 
case of the Universities System the cost of setting up full [)enefits for the 
existing statfs in respect of past service may be put at the accumulated 
amount of hypothetical past contributions with com]K)und interest at 
3 per cent. For disablement benefits on the proposed standard scale in 
respect of past service the calculations appeared to furnish no indication 
of any law that could be made the bjisis of a separate estimate ; but 
Mr. Collins finds a certain relation l)etween the cost of disablement and 
that of the ordinary superannuation. He thinks that if the foiiner were 
included in any general scheme covering pjist service the capital cost 
would be al)out one-tenth of whatever sum might be needed for the 
superannuation and other benefits of the Universities System. 

458. As, however, under such cireumstances there would not be in 
existence the life insumnce policies on which the finance of the projjosed 
central body for disablement would be liased largely, it seems clear tliat 
the proportion of one-third estimated to fall on that body would not apply 
here. For instance, suppose the whole cost of supemnnuation in respect 
of past service (see par. 372) were £450,000, one-tenth of this would be 
£45,000, though the one-tenth relation being only approximate it might 
be more prudent to sj)eak of £50,000 or £60,000. Now it does not folUjw 
that the net cost to the proposed central body would be £15,000 or £20,000 
only. The net ultimate cost of the disablement to the central body would 
probably (see Appendix IX, par. 18) l)e a good deal more than this. 
If, however, £450,000 were expended in setting up insurance policies, 
pr as much of it as applied to the younger lives eligible for insurance, such 
cost should fall a good deal short of the whole £50,000 or £60,000. A 
special actuarial enquiry would clearly be needed to estimate the prolmble 
ultimate cost ; and it will prolmbly be necessary to reckon such cost as 
an addition to the expense of the ordinary superannuation. 



Other Considerations arising out of the Disablement Proposals. 

451). We may point out here that if the proposed central body 
were to assume liability for disablement pensions on such lines, their 
choice of option would not he limited to the maintenance of the policies 
at the onset of disablement. On the maturity of the policies at the 



prescribed age the central body would possess the further valuable 
option of deciding whether to realize the proceeds in cash, making 
itself responsible for the future pension payments, or to leave the money 
with the insurance company, the latter being responsible for paying 
to the central body an annuity of the amount ali*eady stipulated for. An 
insurance company assumes that all lives accepting annuities are of a 
high standard. Some of these disabled lives would no doubt regain that 
standard after years of rest, and it would in their case be sound finance 
to charge the future pensions, after attainment of the age stated in the 
policies, on the insurance companies ; but many would be deteriorateti 
still, and the central body, with access to the facts, would find it pi*ofitable 
in such cases to extend to the future pension the responsibility already 
assumed for past payments. The method adopted by Mr. Collins assumes 
that the latter course would be followed in all cases, so that the option 
referred to here would provide a certain factor of safety or profit in the 
working out of his scheme. 

460. It is only natural to suppose that other questions will arise 
in practice which it will be difficult to foresee and provide for in advance. 
The proposed disablement scheme will have an actuarial basis, and w^ould 
probably be best managed by an actuary. Its success would depend on 
the working out of averages, and the conception underlying it is that every 
policy would be taken over on recognized breakdown. One obWous 
question that may arise is that in certain cases death may seem to be so 
certain, or so imminent, that a sense of individual hardship might exist if 
a policy of considerable potential value were taken over by the central 
body. This might be so even though the assured retained the full benefit 
of such portion as had been pjiid for by the past contributions, and though 
the biilance were surrendered to comply with a law of average applicable 
to a whole body starting with equal chances. A possible solution in 
this case would be to leave to every officer, on a bi-eakdown of health, the 
option which, if the deferred pay principle he recognized (see par. 485), he 
would have possessed before it, vi;5., to vacate his position and carry with 
him the full benefit of the insumnce policy. As the element of self- 
selection is strong, this might in cases where it is exercised prove moi-e 
expensive to the central body than payment of the augmentation 
disablement pensions themselves, and thus upset the avei-age. Though 
such questions will need care in the solution we cannot see anything 
which should render the proposed scheme unworkable. On the contrary, 
such a central body representative of the Hospitals themselves, interesting 
itself sympathetically in the best way of dealing with all cases of 
disablement, might become in time a valuable factor in promoting the 
efficiency of the Hospitals. 

461. The second point to which we drew attention in paragraph 443 
raises questions of even broader significance. Where an option is given 
to the beneficiary as to the class of contract to be eftected, it is clear that 
the man who takes out a deferred annuity, even with return of premiums. 



1(>8 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



SUMMARY OF CONSIDERATION OF DISABLEMENT PROBLEM. 



ie9 






but still more so one who selects a non-returnable contract, deems himself 
likely to live, and expressly shuts out the idea of benefiting by early 
death. This is now seen to be the same thing in kind though not in 
degree as electing not to profit by a breakdown in health. The man who 
effects an endowment assumnce, on the other hand, expressly indicates 
that he wishes to make a provision against early death with, as we have 
seen, its adventitious increase of value in the event of a breakdown in health, 
although the effect of his choice is to diminish the amount of his ultimate 
pension. It is thus clear that while, as we have seen, it would not be 
right to deprive the latter of his earned share of the death benefit for the 
sake of making up a disablement pension, it would seem to be equally 
unfair to make up artificially to the former officer, who has done nothing 
towards providing it, a disablement pension equivalent in amount to that 
of the latter. 

462. It seems to follow from this that in future insui-ance schemes 
where varying options are ottered it will be neccssiiry, if disablement l>enefit 
be contemplated, to arrange in some way that it shall be inter-dependent 
with the death benefit. There might, for instance, he a mininuim scale 
of pensions which all would receive, including deferred annuitants, and 
those insured under endowment assurances should receive, in addition, 
the actuarial equivalent for what now appears to l)e, in the event of 
disablement, the greater value of the contracts which they elected to 
receive. It is, in fact, a question which would have to be investigated by 
actuaries. It would start from a recognition of the principle that when 
a man assures against death he likewise, from the actuarial point of view, 
assures against disablement to a certain extent. The increased power 
which thereby arises to meet his disablement is something which he 
has paid for and should enure as a benefit to him and his paiticular 
class. This consideration in turn suggests a reason why a man without 
dependants, who would in the noi-mal course select an annuity contract, 
might after all \ye better advised to effect a contract with a death benefit. 
In fact, it raises the whole question whether in any future scheme Imsed 
on insurance policies, where it is desired to include disablement pensions. 
It might not be better to limit entirely the choice of a contract to those 
providing a satisfactory death l)enetit. 

463. We thus attach considerable importance to the conclu.sions 
arrived at by Mr. Collins. No doubt they must l.e accepted with some 
reserve until they have been submitted to professional criticism ; but they 
appear to open out a new field for the use of endowment assurance 
policies as applied to the solution of pension problems. Indeed his results 
appear to Ije of a general kind and capable of wide application. The 
principle involved could, for example, either be made the basis of a 
standardized scheme or be applied sectionally to a part of it. It need 
not be limited to new schemes. Modifying the principle in the manner 
suggested in paragraph 445, an existing system, such as the Universities, 
could apparently provide disablement benefits of a satisftictory kind for 



the whole of the endowment assurance section with the aid of a 
moderate subvention ; or any individual institution, or local association 
of institutions, included in an existing scheme could make similar arrange- 
ments, subject only to the general principle that where cases are few iu 
number the financial risk involved in variations from the average would 
be greater. 

Summary of Consideration of the Disablement Problem. 

464. Summarizing what we have written on disablement, it has 
been seen that the Universities System makes an insufficient provision for 
this contingency, but that the primary responsibility for disablement 
benefits should in any event rest on the employer, and that the separate 
administration of disablement pensions might be undertaken advan- 
tageously by the Hospitals. Pursuing therefore an enquiry into the separate 
cost of disablement, we first fixed on a suitable stiindard scale of disablement 
pensions which might be substituted for the amounts secured under the 
Universities System. Different lines of enquiry combined to suggest that 
the cost in advance of such pensions might be reckoned provisionally at 
about one and a half per cent, of the annual salaries; and this 
measure of cost may be applied not only to new entrants coming on the 
scheme in respect of future appointments but also to an existing staff* in 
respect of its future service. On a total salary list of £300,000 (.->w par. 372) 
the total annual cost would thus be £4,500. 

465. We have then adduced actuarial opinion to the effect that if 
the pensions were to be administered by a central body in the manner we 
have outlined it would be possible to reduce the net cost to a figure much 
less than the foregoing. To attain this result insurance policies would be 
effected as in some of the options of the Universities System, and on 
disablement would be handed over to the central body to l)e maintained 
in full force until maturity in.stead of being discontinued. By this mechod 
it is estimated that the net cost to the Hospitals and central lH)dy would 
be about £1,500 per annum on a salary list of £300,000 for a scheme, 
when fully established, commencing with future appointments, or, 
alternatively, an annual sum commencing with something less than the 
whole cost of £4,500 and gradually falling towards the ultimate £1,500 if 
the scheme were applied to the existing staff's in respect of their future 
service. To extend the application of any such scheme to the latter in i-espect 
of their past service would involve a large capital cost. The actuarial 
proposals here referred to ai*e novel and may lead to interesting develop- 
ments. In any future scheme l>ased on insurance policies it will clearly 
be necessary to consider carefully the forms of contract to be approvetl. 

466. It is necessary to point out that our discussion of the 
disablement problem has been based hitherto on the experience of 
males, and principally of a class corresponding with the siilaried officers 
of the Hospitals. The total salary list of £300,000 includes, however {see 



170 



GENERAL CONCLUSIONS AND ALTERNATIVES. 



ff' 






par J72), a male weekly wage class amounting to over one-thirf of the 
Whole ; and a fmale class, principally on the nursing staffs, representing 
nearly „ne-th,rd of the whole. As .-ega^ls the weekly wage class it i^ 
>e,y (hfflcult to say whether the cost of disablement, i-elatively to that of 
ordinarysuperannuation, would l,e greater or smaller than in the salarie.1 
c^ass. The estm.ates we have quoted involve the assumption that it will 
be the same. 

467. As regards the female cla.ss the figures we have quoted involve 
a similar assumption, but in this case the uncertainty is emphasized by 
the general principle that results based on male lives must not be 
reckoned as applicable to females. This class consists chiefly of those 
permanent members of the nursing staffs who are to be considettid 
eligible for inclusion in a pension scheme. Including those who 
following the principle we have laid down as to migration, should be 
able to change their Hospitals without loss of pension rights, the nmnber 
ot this group aiTiving at higher positions is necessarily small. As 
regards the rest the provision of a flat rate of pensions for aU nui^ses in 
accordance with the scheme outlined and recommended by us in Part I 
of this Report K par. 105) would have an effect on the cost of extending 
the grant of disablement benefits to the permanent nursing staffs. If the 
po icies effected under that scheme are merely deferred annuities, it would 
not assist as much as if they were endowment assumnces, car^^ing a death 
benefit. It is further clear, even from our own superiicial notes on this 
question (.^.Appendix XIII, par. 2), that the mte of disablement is 
heaver- and follows different laws in the case of women, and among 
nurses it might not improbably be even heavier than in other classes 
I'or instance, it is seen that in the case of the Elementary School Teachers' 
whose male experience resulted in the low cost of disablement arrived at 
by Mr. Collins, the female disablements were exceptionally numerous. 
On the other hand. Mr. Tinner's Table, which resulted in a high cost for 
the males shows a relative number of female disablements far smaller 
than in the other Tables summarized on the same page. With such 
factors of uncertainty it would be impos.sible for us to attempt to assess 
the p.-ol>able cost involved, and we doubt whether actuaries could do so 
satisfactorily. It is fair U, the actuaries concerned in our enquiry to sav 
that they disclaim any responsibility for the application of their resulu to 
female live?. 

468 We think that, for the purposes of preliminary considemtion, 
It might be well to increase the sum of £4,500 per annum mentiontnl in 
paragraph 465 to a round sum of about £5,000 per annum a^ being the sort 
of financial provision, constituting real cost but only for the initiation of 
the scheme, that would l>e involved in the axloption of the scheme for 
disablement pensions that we have outlined. This estimate it will 
be seen, is intended to cover the whole cost of the supplementary 
disablement pensions falling on the Hospitals, including such help al 
the proposed central body would be able to give from extmneous 
sources. It further assumes that the existing staffs will be included 



CONCLUSION AS TO FEDERATED UNIVERSITIES SYSTEM. 



171 



in respect of their future service. As time passes after the 
initiation of the scheme, and when any unusual flow of i-etirements 
consequent thereon has been provided for, it is to be presumed that the 
annual cost would rapidly fall, and in tiuie approximate to the £1,500, or 
it might be £2,000, reckoned on by the actuaries for a fully-establisheil 
scheme. In the concluding portion of Appendix XIII, where the 
different estimates of the cost of disablement have l)een discussetl briefly, 
will be found also some remarks on the conjectured operations of the 
central body, and on the manner in which the finances of the Hospitals 
are likely to be affected, even if the estimates of cost be exceede<l, 
by the endeavour to provide in advance for this part of their future 
liabilities. 

469. The whole question of the cost of disablement is so complex 
that the methods we have applied in discussing it must neces.sarily 
appear crude and open to criticism, but there seemed to be no 
other way of supplying to the Hospitals a provisional idea of the 
actual cost of previding in advance for disablement pensions, except by 
a costly actuarial investigation, which does not seem to be calleii 
for at the present stage. Even skilled actuaries, working on pi\>per 
statistics of the existing staffs, could not state the future cost of 
disablement with definite exactitude. Our en(|uiry {see par. 450) has 
shown one estimate two and a half times as large as another, the 
difference being entirely due to differences in the standaixl tables 
respectively selected for guidance by the actuaries who made the estimates. 
If to this we add the complications arising from the inclusion of the 
weekly wage class and female lives it is seen that until a scheme has been 
actually opei-ating for many years the effective rates of disablement in the 
various classes of Hospital service cannot be known. We think, however, 
we have shown that the (juestion is quite capable of l>eing brought within 
manageable limits, and that when matters have iulvanced sutticiently to 
present more definite problems for solution, further actuiirial enc|uiries, 
starting from the point to which we have carried the investigation, and 
based on complete statistics of the staff's, would lead to a much closer 
estimate of the sum which may be said to represent the existing liability 
of the Hospitals in this matter, and which it would be preferable to 
provide for on some definite plan. 



Conclusion as to Federated Universities System. 

470. Having arrived at the conclusion that sepjirate treatment of 
disablement benefit is desirable, and given reasons which supjjort the 
view that it would be also practicable, we are thus led to the further 
conclusion that a scheme of the type adopted by the Federated 
Universities would be a practicable solution of the question for the 
Hospitals of London, and that this system either complies or is capjible 
of being adjusted to comply with the various conditions we have laid 
down. 



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FINAL CONCLUSIONS AND RECOMMENDATIONS. 



Final Comparison of iMutual and Insurance Methods. 

471. It i-emains to summarize what we have said of the relative 
advantages and disadvantages of the mutual and insumnce methods as 
instruments for applying the money purchase principle to the pension 
question. It will be convenient to deal separately with administrative 
and actuarial considerations. 

472. On the administrative side, it would seem at first sight to be 
an advantage from the point of view of the members that a mutual 
tund such as that proposed by Mr. Tinner can have the disablement 
pensions thrown on it, but we are warned by Mr. King, and by the 
experience of other funds, that considerable difficulties and dangers 
ensue m the administration of this particular benefit in such a case We 
further found (... par. 385) that men with practical experience of 
Its working disapprove of the principle of chaining disablement 
pensions on a superannuation fund, and our discussion of the problem 
as a whole, starting from first principles, (see pars. 402 to 405) has led 
us to the conclusion that an alternative solution is in itself desirable. 
In fact the evidence we have adduced might justify the conclusion that 
m the case of the Hospitals it is necessary. 

473 In all other respects facility of administration would seem to be 
on the side of an insurance scheme. A mutual fund, with contributions 
ot, say, £30,000 per annum, might be estimated to increase rapidlv for 
60 years or more, and ultimately to amount to £1,500,000, with an annual 
income of £90,000, of which £(50,000 would be from interest* Such a 
fund would need much skilful management. The Railway Clearing 
System Fund (s.e pars. 229 et ..y.). the only fund brought to our notice 
which serves several institutions, has evidently been through stormy periods 
m the sphere of administration as well as failed to pay its pensions 
unaided. In the case of the Universities System, on the otheV hand, 
It IS difficult to see room for the emei^ence of any important questions of 
controversy m administration. The detailed arrangements and payments 
of contributions are settled between the constituent bodies and the 
insurance companies. The central council, though it is the ultimate 
authority for seeing that the regulations are complied with, for making any 
modified arrangements involving principles with the insurance companies 
and for adding to or changing the companies selected, has little actual 
work to do beyond keeping records. 

474. But perhaps the most important advantage of an insurance 
scheme on the administrative side is the facility with which it meets a 
conduion laid down at the outset of our enquiry (... par. 5). Unlike a 
mutual fund, such a scheme lends itself readily to extension without in 



FINAL COMPARISON OF MUTUAL AND INSURANCE METHODS. 



173 



• See estimate of Mr. H W MnnW t? r a u j 
the Institute of Actuaries, Vol. 45, p 222. °° ^' °®°*' *"*^'^^' '"^ ^'^'^'^^ «/ 



any way affecting the interests of existing members. Except as to 
arrangements for providing the supplementary disablement benefits, which, 
as we have seen, could be applied lociilly or sectionally, the system 
would lend itself easily to the inclusion of any other Hospitals or 
analogous institutions that might wish to join. Applying the system as 
the Universities have done [see pars. 208 to 270), such capability of 
exptinsion is limited only by approval ly the insurance coniptmies of the 
class of lives involved. In the case of the Universities System many 
institutions have in fact joined it since it was initiated. Even if an officer 
were to change to an institution outside the scheme, he would carry with 
him his policies, and there is nothing to prevent his making a special and 
individual arrangement with the new institution for their maintenance, 
which he could not do in the case of a mutual fund. By such a .system the 
principle of migration without loss of pension rights, to which (see par. 37) 
we have attached great impoi-tance, is encouraged in the brojidest 
possible way instead of being limited to institutions included in the 
particular .scheme. 

475. On the financial and actuarial side the differences may l>e 
defined with equal clearness. The insurance scheme provides benefits 
which are definitely guaranteed, except as to the profit element, and 
the amounts of which have been seen in our review to compare well with 
the benefits secured by other methods. This was also the conclusion 
of the Departmental Committee of the Home Office on Reformatory' 
and Industrial Schools (see par. 280). The mutual plan, on the other 
hand, can guarantee nothing, if unsupported by extraneous guarantee, 
but it can and does promise that the members shall ultimately enjoy the 
utmost penny of benefit to be derived from the investment of their own 
contributions. It was, therefore, important to enquire what this latter 
benefit is likely to be worth in practice. 

470. We have found that when allowance is made for expenses of 
management, and for the risks connected with investments and with the 
future rate of mortality, it is not possible to predict the future working of 
a mutual fund. In the case of Mr. Tinner's scheme, the inclusion of 
disablement pensions, a possible recommendation from the meml)ers* 
point of view, introduces an additional and, as our own enquiry into the 
cost of them has shown, a very uncertain element of risk from the actuarial 
point of view ; though we should like to add that our investigations have 
impressed us with a sense of the cautious and conservative spirit in 
which Mr. Tinner has framed his estimates. The actuarial eWdence, 
however, proves that the mere existence of a pension scheme, and more 
especially of disablement pensions, may radically alter some of the 
elements on which the calculations depend. The history of the Railway 
Clearing System Fund, and the causes which led to its deficiency of £482,937 
in 1903 (see pars. 233 and 245), show this very clearly. There are thus 
uncertainties of the domestic order to combine with those general and 
public tendencies, influencing the future wealth and longevity of the whole 
community, which may affect adversely all pension institutions alike. 



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174 



FINAL CONCLUSIONS AND RECOMMENDATIONS. 



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477. The immediate outlook of a high rate of interest for some years 
might indicate advantage from a mutual scheme. But conditions may l>e 
different 30 or 40 years hence, when the fund would still be rapidly 
growing and investing fresh money. This consideration, and the almost 
certain future improvement in the longevity of the community, would 
indicate advantage from an insurance scheme. It seems impossible in such 
conditions for anyone to .say with certainty on which side the advantage 
will ultimately lie. The past, while affording examples of the profits of 
mutual associations for life insurance, gives none such in the field of 
annuities. On the contrary losses have l>een frequent, and in causes 
disastrous. Bearing in mind, therefore, that the proposed fund would deal 
only m the less profitable class of risk.s, it seems a matter for the excrci.se 
of common sense, l>ased on adequate consideration of such facts as are 
available, whether it is l)etter to be content with the absolute security of 
such benefits as can l)e definitely purchased, or to run the risk of having 
less in order to enjoy the apjmrently remote possibility of having more 
In other words, the founders of any mutual annuity fund, in present 
conditions, must fii-st answer the (luestion, Are the pi-ospects of additional 
gam such as to compensate us for the risks of being worse off, and also for 
the contmuous consciousness that absolute security is lacking ? So far 
as our own enquiry is concemcfl, the advocates of a mutual fund have 
put forward no evidence to support an affirmative answer to this 
question ; nor have we ourselves found any. We have, on the contrary, 
quoted numerous cases of mutual funds where bitter disappointment 
and hardship would have awaited the pensioners in old age if extraneous 
funds, ninning into very large figures, had not been available to restore 
solvency. 

Rejection of Mutual Principle. 

478. Our own conclusion on this matter, summarized in para- 
graph 408, was that adequate security could not lie obtiiined by the 
mutual principle otherwise than by the provision and maintenance 
of such ample margins as rol) the principle of its attractiveness 
{see also par. 397). It is only fair to Mr. Tinner to say that, as has 
been made clear in the course of our enciuiry {see pars. 363 and 450) 
he has by the adoption of stringent Ijasic Tables and other assumptions 
on the side of safety avoided as far as- possible any exaggeration 
of the claims of the mutual principle in general or of his own 
scheme in particular. We postponed a final expression of opinion on 
Mr. Tinner's scheme until we had enciuired into alteniative methods 
of providmg disablement pensions. Having now, however, arrived at 
the opinion that dis^iblement not only can be but had better be 
regarded as a sepirate problem, we are led to the conclusion that 
from the point of view of a self-supporting scheme, the suggestion of a 
mutual fund must be rejected. 

479. Our review has shown that, frequent as has been the occurrence 
of deficiencies in mutual funds, the members have not necessarily 



REJECTION OK MUTUAL PRINCIPLE AND MAIN RECOMMENDATION. 175 

suffered ultimate loss, because there has usually been a strong financial 
guarantee behind the fund to make good the deficiency. We may 
therefore enquire whether it is feasible to provide a sufficient financial 
guarantee to secure adequately the supposed benefits of a mutual scheme 
for the Hospitals of London. 

480. It emerged clearly at an early stage of our Report that the 
Hospitals themselves are not qualified to give a guarantee of this 
kind. If the governing body of King Edward's Fund had the 
power under its special Act of Parliament* and were willing to 
provide such a guarantee, that fact in itself would clearly give us cause 
for reconsidering the feasibility of initiating a mutual scheme. In view, 
however, of the very large sums that, as we have seen in the course of 
our Report, have had to be provided in the past under such guarantees, 
and of the apprehensions of the future in a sense adverse to such 
guarantees formed by experienced actuaries, we recommend the Executive 
Committee not to make itself in any way responsible for approving a type 
of scheme dependent for its solvency on a financial guarantee to be given 
by King Edward's Fund. . 



Final Conclusion on main question and Recommendations. 

481. We thus arrive at the final conclusion that a scheme based 
upon recourse to insurance companies is the only possible solution of the 
superannuation problem before us. We accordingly RECOMMEND that a 
joint conference of Hospital representatives should l>e invited to consider 
the whole question on that basis. In addition to the Hospital Committees 
and officers, care should be taken that the nursing staff's and weekly wage 
class are separately represented. We may say here that if the latter 
classes appeiir to have received little separate consideration in Parts II 
and III of this Report, it is not that we have overlooked their claims to 
be provided for. In the aggregate they constitute {see par. 3*>9^ 
a considerable proportion of the pensionable class, but essentially 
we have been discussing principles. If these be settled, the task of 
adapting them to particular cases, though needing c^re, should present 
no real difficulty. , 

482. Experimental calculations should be based on the assumption 
that the employer and the beneficiary would each contribute 5 per cent, 
of the salary, so as to make a total available contribution of not less than 
10 per cent, for purchasing the benefits. The system should be luade 

♦ King Edward's Hospital Fund for London Act 1907 (7 Edw. 7, Ch. Ixx), Section 3, 
authorizes tiie Corporation to " execute any special trusts in connection with moneys or 
" property held or obtained by the Corporation (not being inconsistent with the purposes of 
•• this Act) to apply the capital and the income of the funds and property of the Corporation 
" or any part thereof subject to any such trusts and to the provisions of this Act in or 
" towards the support, benefit, or extension of the Hospitals of London, or some or any of 
" them (whether for the general or any special purposes of such Hospitals) and to do all 
" such things as may be mcidental or conducive to the attainment of the foregoing objects." 



•ll" 



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176 



FINAL CONCLUSIONS AND REC-OMMENDATIONS. 



obligatoiy in the case of all new appointments, so that all officers coming 
into the scheme would be consenting parties to the contribution. We 
do not suggest that a uniform rate of contribution at the exact rate of 
10 per cent, is fundamentally neces.saiy to the success of the scheme. 
Indeed, Mr. Tinner has shown {^ee Appendix VIII) that under the money 
purchase principle a Rite ranging from 8 per cf nt. for young ages at entry 
upwards to 12J per cent, for older ages, at entry would more closely 
reproduce the scale of pensions aimed at by the Hospital officera 
themselves than a uniform rate of 10 per cent. As Hospital officers 
usually enter at young ages our own illustrations and comparisons were 
all based on young ages at entry ; and we followed the Universities plan 
of a uniform 10 per cent., which provides better pensions for tho.se ages. 
Tlje graduated rate would reduce the capital sijm that would have to \ie 
raised if it Iw attempted to piovide for the existing staffs in respect of 
past service. On the other han<l it would increase the inunediate anniLal 
charge the Hospitals will Ikj asked to assume for existing staffs in respect 
of their future service. The balance of advantage would seem to be on 
the .side of the uniform 10 per cent. There is also the further imjjortant 
consideration that it would be very inconvenient in practice to have an 
officer's initial and subsequent policies provided for at varying rates 
for different portions of his salary, a difficulty which would l)e accentuated 
in case of migration. The fact that a man changing employment would 
have to be provided for on a higher scale in respect of any increased 
remuneration is somewhat opposed to the principle of interchangeability, 
which it would be one of the objects of the scheme to facilitate, wheremi 
a uniform rate of 10 per cent, running throughout would be simple for 
everyone concerned. 

483. The question of including the existing staffs is,as we have pointed 
out, a question of great cost if full benefits are to l^e provided in advance 
for them. In accordance with the principles we laid down in paiagmphs 334 
and 355, it is important to begin by differentiating strictly lietween past 
service and future service. Assuming that it were decided to set up, as 
if for new entrants, a prescrilied contribution in respect of all future service, 
a scheme of the type we recommend would adapt itself readily to the 
provision of such proportionate amount of j)ension as would be properiy 
purcha-sable by such future contribution. We therefore recommend 
that in the wise of the existing staffs a serious effort should be made to 
treat each year of future service, dating from the initiation of the scheme, 
as pen.sional)le, and carrying its contribution as far as it will go towaitls 
the pension. It would l>e necessaiy for each Hospital Committee to 
make individual arrangements with its staffs to gain their concurrence in 
such a scheme (.w par. 373): and in order to facilitate such arrangements 
each Hospital Committee should have full discretion to provide such 
portion of the contribution as it might think fit, so long as the total 
ccmtribution did not fall below the prescril>etl percentage of the future 
salary. 

484. This would scarcely constitute the immediate gain of security 



RECOMMKNDATION OF INSURANCE PRINCIPLE. 



177 



to which the existing officers aspire. On the other hand, it would need 
an effort on the part of the Hospitals to do as much as this, as is 
clear from the history of the London County Council Supemnnuation 
arrangements (see pars. 193 and 332). We ourselves should regard it 
as a distinct gain for the existing staffs if they could be included 
at once in this way rather than that they should be excluded until 
a complete solution of all financial difficulties could be arrived at. 
After the start of a scheme in which they were thus included every 
year that passed would diminish the proportionate part of their 
pensions to be made up by the Hospitals by means of supplementary- 
payments in arrear, and would thus begin at once to improve the security 
of the existing staffs. It would further be one of the first tasks of any 
general council administering the scheme to direct an actuarial investigation 
{see par. 369) into the cost of including the existing staffs in respect of 
past service, and generally to consider the question of laising a special 
fuifd in the manner we have indicated (see par. 371) as the only 
possible means of basing the pensions on past service as well as future 
service ; or, if funds are insufficient, on as much of the past service as 
may be possible. We may suggest that a system of local superannuation 
committees at the larger Hospitals, on which the officials could be 
represented, might be very useful in raising and administering local funds 
for assisting special cases as well as watching the interests of the staff in 
the main scheme and generally advising the Hospital Committ(^e in the 
proper disposition of such of the benefits as would be administeretl in 
the discretion of the individual institutions. 

485. Another important question of principle, to which we have 
drawn attention more than once (see pars. 270, 276, 334, 344 and 410), is 
the feature of the Universities System in accordance with which the 
whole benefit of an existing assurance enures to the contributor, in the 
absence of misconduct, not only on migration to another institution within 
the system but on withdrawal generally. If the proposed confei-ence, or 
any general council issuing from it, should form an opinion adverse to such 
a principle, we do not regard it as so fundamental as to be essential to 
the prosecution of the scheme ; and if it were decided that the part of a 
benefit repi-esented by the Hospital's contributions should l^e forfeited on 
withdrawal, it might be arranged that the value of such benefits, instead of 
reverting to the Hospitals, should be handed over to the proposed central 
body for disablement, to be applied towards such part of its liabilities ^s 
would otherwise fall on the Hospitals. We have noted (see par. 139) that 
the principle of vested rights accruing from year to year was not admitted 
by Lord Courtney's Commission in the case of the State service, but we 
have given reasons (see par. 35) for regarding Hospital service as very 
different from that of the State. We have remarked already (see ptir. 474) 
that the existence of a principle which removes all penalties on migration 
would afford a basis for extending easily the proposed scheme to any 
provincial hospitals or analogous institutions that might wish to join it. 
Taking a still broader view, it seems to us that in the case of charitable 
institutions, resting on a financial basis necessarily insecure, the 



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FINAL CONCLUSIONS AND RECOMMENDATIONS. 



RECOMMENDATION AS TO DISABLEMENT BENEFIT. 



17ft 



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ill 



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recognition of the principle that pension rights do accrue and vest from 
year to year, and are not dependent on long service projected into the 
future, must promote a sense of security that otherwise will be lacking in 
such a service. The principle exists already in the affiliation schemes of 
the Royal National Pension Fund, and is involved in our proposed scheme 
for young nurses (see par. 105). For the foregoing reasons, and those 
mentioned in the earlier paragraphs cited, we regard the recognition of 
the principle in question as calculated to mise the status of Hospital 
service as a whole ; and we recommend the Executive Committee, if the 
question should arise, to follow the precedent set by the Board of 
Education as regards the whole teaching service of the country and to 
cast their influence on the side of discountenancing the mere parochial 
view of pension obligations, and in favour of the principle that every year 
of Hospital service, whenever and wherever given, should he regarded as 
pensionable with rights vesting accordingly. Our own concrete estimates 
and illustrations have all been made on the latter basis (see, for example, 
par. 363), though the application of the principle to existing staffs in 
respect of past service might call for special consideration. 

486. The scheme to be formulated should be based generally on the 
principles we laid down in paragraph 378. The determination of the age 
of retirement under heading (i) should be considered carefully. Our 
discussion of the disablement question {see par. 462) has shown that it will 
be necessary also to consider carefully the types of insurance contracts 
to be approved. We have given reasons (»ee pars. 339, 389 and 432) 
for the conclusion that, independently of the disablement problem, the 
best method of arranging the benefits in an insurance scheme has not yet 
been reached in any existing scheme that has come before us. Subject to 
the further consideration of these matters, such questions as the general 
conditions of policies to l>e granted, the companies that should he selected 
for the purpose, and all necessary working details, may be regai-ded as of 
mmor miportance and should be left to be arranged in such a way as 
would best suit the circumstances of the Hospitals and the beneficiaries. 

487. The numericiil illustrations that we have given had reference only 
to the male salaried staffs, and, as we have said, most of the arguments we 
have used apply primarily to that class. The case of the permanent 
nursing stafls and of the weekly wage staffs would call for special 
eonsideration ^ regards certain details ; but there would not be, we are 
advised any difficulty in arranging for forms of insumnce contnujts 
applicable to these classes when once the main principles have been 
detei-mined. It is one of the advantages of i^ourse to insumnce 
companies that any special circumstances or difficulties affecting a 
particular class or sex must be considered and provided for at the outset 
instead of being left to produce possible complications in the future. In 
the case of the nursing staffs there is, as we have already found 
{see pars. 7«, 88 and 371), an accepted idea that nursing work is especially 
arduous, and that pensions must be available at early ages. Mr. King's 
evidence as to the longevity of nurse pensioners casts some doubt on this 



theory. It is possible that in the future, with improving conditions 
generally, the nursing staffs of the Hospitals may work for normal durations. 
It would thus be a great advantage in their case to have a flexible 
arrangement, such as exists in the Universities System, whereby the 
policies can be made to mature at ca fairly early age, with the provision 
that, if retirement be postponed, the money then available and all future 
contributions will automatically accumulate to increase the ultimate 
pension. 

Conclusion and Recommendation as to Disablement Benefits. 

488. If the Executive Committee should accept our conclusion on 
the main question, and approve the type of superannuation scheme we 
have recommended, we think it very desirable that practical steps should 
be taken to deal with the question of disablement on the lines we have 
already indicated in paragraphs 435 to 438, and developed further in the 
succeeding paragraphs treating of the cost of disablement. 

489. We have laid down the principle (see pars. 405 and 435) that 
responsibility for a disablement allowance should rest primarily upon the 
Hospital, and suggested (see pars. 436 to 438) that assistance might be 
given through a central body representative of the Hospitals themselves. 
We have outlined further possible developments in the practical handling 
of this problem which would necessitiite the taking over by the central 
body of all insurance policies on disabled lives. By adopting the 
system here contemplated it is probable (see pars. 441 to 458) that the 
annual amount to be expended or set up by such a central body would l>e 
much less than the full calculated cost of the disablement pensions. 

490. Subject, therefore, to the foniiulation of a general scheme by 
the proposed Hospital conference (see par. 481) in accordance with our 
main recommendation, we further RECOMMEND the Executive 
Committee to take into consideration the best way of making provision in 
advance for disablement benefits by means of a central body constitute<l 
and exercising functions in the manner we have outlined in 
paragraphs 437 and 465. In this matter we are of opinion that the 
King's Fund should offer its help by way of advice, or, if thought 
fit, of pecuniary assistance. It may happen that the most practical form 
of assistance in the first instance would be that the Executive 
Committee should offer to obtain actuarial advice (see jwr. 469) 
as to the feasibility of meeting the problem in some such way as we 
have outlined, and as to the probable cost to the central body and 
Hospitals of doing so. It is desirable in the interests of the Hospitals 
that the Executive Committee, befoi-e committing itself to the principle 
of recognizing such a central body or considering the question of 
contributing to its funds, should have closer estimates framed of the 
income needed for provision in advance than it has been possible for us to 
make. In this way it should be possible to assign maximum limits to the 
annual cost sufficiently trustworthy to enable the Executive Committee 

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180 



FINAL CONCLUSIONS AND RECOMMENDATIONS. 



DISSENTIENT MEMORANDUM : POINTS OF AGREEMENT. 



181 






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O 



to consider our proposals on their merits and, if approved, to commend 
them to the Hospitals. It must not be foi^otten that moml responsibility 
for disablement benefit already rests on the Hospitals, and that its 
proposed systematization is designed to act ultimately in mitigation of 
and not by way of increase to, the financial liability to which the Hospitals 
are thus at present subject. 

491 . It remains to record our acknowledgments to Mr. H. K. Maynard 
the Secretary, for his valuable services throughout our prolonged enquiry • 
and we should also like to express our thanks to the two actuaries we 
have quoted so often, Mr. T. Tinner, F.I.A., and Mr. F. L. Collins, F I A. 
First invited to submit evidence to us as witnesses, these gentlemen were 
afterwards good enough to make special calculations at our request and 
to give us advice without which we could not have arrived at some of the 
conclusions we have recorded. 

W. J. H. WHITTALL, Chaii^man. 

HENRY L. HOPKINSON. 
July, 1918. 



a 



Dissentient Memorandum by SIR WILLIAM J. COLLINS. 

I regret that I cannot attach my signature to the foregoing report 
because I am unable to concur with the "final conclusion on the main 
*' question" (par. 481), viz. : --that a scheme based upon recourse to 
" insurance companies is the only possible solution of the superannuation 
" problem liefore us." I agree with the recommendation that the results 
of the labours of the Sub-Committee-in which I have endeavoured to 
bear a part -should be laid before a Joint Conference of Hospital 
representatives and officers for their consideration, but I cannot agi-ee 
that such Conference should be exclusively limited in its deliberations to 
a solution of the problem of adequate pensions for Hospital Officers by 
" recourse to insurance companies." 

I desire to pay a tribute of acknowledgment to the Chairman for the 
valuable and voluminous survey of various methods of providing pensions 
contained in parts II and III of the Keport and elaborated by him, despite 
the stress of ill-health, with infinite care and patience. 

As regards the first part of the reference to the Sub-Committee, 
viz. :— " the existing provision for pensions to Officers and Staff employed 
•' in the London Voluntary Hospitals " there is no difference of opinion. 
While it appears that in the London Hospitals, with or without pension 
schemes, it is the practice to make some provision for pension in 
recognition of long service, such provision is often inadequate in amount 
generally uncertain as to age of retirement, etc., and quite unsystematic! 
The Sub-Committee is unanimous in finding " that the case submitted by 
" the Hospital Officers Association as summarized by us in paragraph 7 
" is, generally speaking, made out " (par. 109) ; and that " a greater security 



" for pensions and facilities for earlier retirement would tend*not only to 
" satisfy a legitimate desire on the part of Hospital OH leers but also to 
" improve the status of the service and the efficiency of the Hospitals " 
(par. 115). The Association's case was for a General Scheme l)ased on 
the terms of the Superannuation Act of 1859 or that of the Asylums 
Officers' Superannuation Act of 1909. The latter Act, which I inti-oduced 
into the House of Commons, required a contribution from officers and 
recognized the principle of " aggregation " of service for the purposes of 
pension (pars. 164-168). 

4 The qucesita for any such general scheme are well set i>ut in 

paragraph 115 (3) of the report ; the Imsic considerations involved— upi>n 
which there is room for " legitimate differences of opinion " — are stated in 
paragraph 119 and are considered at length in actual and possible 
developments in parts II and III of the report. I should have been 
content with such "endeavour to contribute to the solution of those 
" problems " (par. 120) without finally "accepting any i-esponsibility for a 
" system," leaving the rival claims of alternative schemes for accepUmce or 
rejection by the parties immediately concerned. 

5. I concur with my colleagues in believing that " the prejudice against 

" making provision, out of the funds of voluntary charity, for the old age 
" of an officer who has rendered long and faithful service has largely if 
" not wholly disappeared " (par. 8) and in regarding such prejudice as 
" old-fashioned." " The granting of a pension is a method of paying to an 
" officer a certain portion of the remuneration which he has earneil and 
" the payment of which is part of the ordinary expenses of carrying on the 
" work " and is recognized by the King's Hospital Fund and the other two 
great Hospital Funds for London, under the Uniform System of Accounts, 
as a legitimate part of hospital expenditure (par. 9 and Appendix 1, 1). 

H. The summary of conclusions contained in paragraph 378— with the 

possible exception of No. v— appears to follow from the review in i>art II 
and to be the legitimate supplement of the preliminary conclusions 
contained in paragraph 115. 

7. The Report after dismissing schemes in which the pensions would l»e 
provided " in ari^ear " or " partly in advance and partly in arrear " or on 
an absolute scale or flat rate, proceeds to consider only those in which the 
pensions are provided " wholly in advance." Schemes l>ased on a salary 
percentage scale are then eliminated and the final choice is narrowed 
down to those conceived on " the Money purchase principle " either (i) by 
way of a mutual fund charged with disablement pensions or other l^enefits 
in addition to the defined superannuation annuities or (ii) by purchase of 
definite annuity or death benefits from Insurance Companies. 

8. An attractive scheme preimred by Mr. Tinner of the London County 
Council with " cautious and conservative " estimates and " stringent basic 
" tables " on the mutual principle and possessing a marked advautige in 



182 



DISSENTIENT MEMORANDUM BY SIR WILLIAM J. COLLINS. 



DISSENT FROM ABSOLUTE REJECTION OF MUTUAL FUND METHOD. 



183 



ii 



providing for disablement l>enefits, which exi>erience shows are a 
considerable proportion of the whole, is i-ejected in favour of ** recourse to 
"Insurance Companies" as the ''only possible solution." Mr. Tinner's 
scheme is dismissed on the ground that without adequate security by 
way of some financial guarantee of solvency liehind the nuitual fund it is 
not considered " feasible," and that under no circum.stances should the 
King's Fund be reconmiendeil to provide such gimrantee. 

9 The Insurance Company method, known as the Federated University 

System, was opposed by the Hospital Otticers Association on the grounds 
(i) That the death benefit could he pifjvided by the officer himself and was no 
necessary part of a pension scheme, and (ii) That in relying on Insurance 
Compjinies it must necessarily be expensive as it had to contribute towanls 
the profits and expenses of their business (par. 260). Moreover it is 
admitted in the Keport (par. 428) "that the absence of an adequate 
" provision on disablement is a marked disadvantage in the case of the 
'• Universities System. Not only does retii*ement l)efore the .age of 00 
" leave the officer without income for sustenance until that age, but if and 
** when he attains 00 the pension entered upon must be for a reduced, and 
" in cases of short service very much reduced amount. The system itself is 
" incapable of l)eing amended to rectify this defect." This " hiatus " it is 
prop(jsed to fill by setting up an entirely sepirate organisation to deal 
with disablement l)enefits. A Ccnitral Body, possessing the confidence 
of the Hospitals, to which the King's Fund " should give its support " 
and to which "the Executive Committee might even see its way to 
" advise a money contribution " is to be set up (pars. 4:i0-437). A rather 
speculative scheme is adumbrated whereby this Central Body should 
" nurse " the Insurance policies of the disabled (par. 442) and thus reduce 
the " pecuniary assistance " or " liability " which the King's Fund might 
be invited to underUike (par. 490). The amount of such " subvention " 
or " liability," if the existing staffs and female classes are to Yte brought 
in for purposes of disablement l^enefit, is difficult to estimate in view of 
the " factors of uncertainty " involved (pars. 464-469). 

10. It is evident that resort to the Insurance Companies as the only 
possible solution fails to provide for disablement benefit and that in order 
to make such provision a Central Body has to be invoked upon which an 
indefinite financial responsibility will be imix>sed. 

11. It would therefore appear that whether the " Mutual principle " or 
the " Insurance Compiinies scheme " be resorted to neither can be 
recommended as complete or adequate unless some financial support be 
forthcoming from outside sources ; and in either case the julvantage of 
the co-operation of some Central Body, in which the HospiUils have 
confidence, to manage and administer the scheme, in whole or in part, is 
recognized. 

12. As pointed out in the report (par. 480), King Edward's Fund not 
only possesses large invested funds but its Special Act of Parliament 



expressly authorizes it to " execute any special trusts in connection with 
" moneys or property held or obtained by the Corporation (not l>eing 
" inconsistent with the purposes of this Act) to apply the capital and the 
" income of the funds and property of the Corporation or any pjirt thei-eof 
" subject to any such trusts and to the provisions of this Act in or towards 
" the support, benefit or extension of the Hospitals of London, or some or 
" any of them (whether for the general or any special purposes of such 
" Hospitals), and to do all such things as may be incidental or conducive 
" to the attainment of the foregoing objects." 

13. My two colleagues would, if the King's Fund were willing t(j provide 

such guarantee as they consider the " Mutual principle " scheme requires, 
be willing to reconsider its " feasibility " (par. 480). In connection with 
the cost of pensions in respect of past services of the existing staff they 
remark (par. 374) : — 

*^ The King's Fund from the time of its institution has Iteen the 
" recipient of princely benefactions, and it is to be hoped that, upon 
" this need becoming known and realized, the necessary funds 
" would be forthcoming. There are many wealthy persons who 
" cannot fail to recognize that institutions like the Hospitals of 
• " London directly depend for their success on the brains and willing 
'* service of the officers who administer them, that the efficiency of 
" the officers and of the whole of the staffs must in turn dii-ectly 
" depend on the attractiveness of their career, of which a suitable 
" provision for old age has been seen to be an essential part ; and 
" that money expended in that direction may, from the strictly 
" business point of view, eventually prove to be a more fruitful factor 
" in relieving sickness and suffering tlian money which at the moment 
" might seem to be applied more directly to that object We put 
" forward this argument quite deliberately as one to appeal to men 
" familiar with business and the conditions on which success in 
" business depends." 

14. Having regard to the fact that the provision of pensions is regiutled 

by the Fund as legitimate expenditure of ordinary Hospital revenue, 
towards which latter the King's Fund makes such large subventions, antl 
to the fact that by its statutory powers it is a legitimate use of its general 
or special funds to render financial support, whether by guarantee or 
subvention, towai*ds securing adequate pensions for Hospital officei-s or 
staffs, there is no insuperable objection to the Fund rendering assistance 
to the Hospitals in this respect. 

15. Seeing then that the adoption alike of the "Mutual principle 

scheme" and the "Insurance Company scheme" appeai-s to reipiire 
the administrative and financial aid of a Central Body in which the 
Hospitals have confidence and seeing that the King Edwai-d's HospiUil 
Fund is a body that, if willing, is able to provide such requirement, I 
cannot agree with my colleagues that a scheme based upon i-ecourse to 
Insurance Companies, supplemented as suggested by a subsidized scheme 



•1*. ^ 



184 



DISSENTIENT MEMORANDUM BY SIR WILLIAM J. COLLINS. 



r 



for disablement benefits, is the only possible solution of the problem 
before us. 

le. If the Joint Conference of Hospital i-epi-esentatives and officers be 

«unmione<l, as recommended, I trust that they may l>e in a position to 
consider the alternatives presented in the report without being restricte<l 
m their deliberations and choice to one particular method, admittedly 
inadecjuate by itself, of meeting their requirements. 

17. I gladly endorse the remarks contained in i>aragraph 491 of the 

report. 

^ , ,^, WILLIAM J. COLLINS. 

July, 1918. 



Pan. 
6-7 



8-10 



88-48 



50-57 



68-71 



78-97 



SUMMARY OF REPORT 1^ 

SUMMARY OF THE REPORT 
Signed by Mr. Whittall {Chairman) and Mr. Hopkinson. 

{Prepared by the Secretary to the Sub-Committee.) 

PAKT I.— The Existing Provision for Pensions at the London Voluntary 
Hospitals. Recommenpation as to Young Nurses. Objects to bb 
aimed at in any General Scheme op Pensions, and recital op 

FUNIUMENTAL QUESTIONS TO BE SETTLED. 

(1) The first part of the Report recites the case submitted by the Hospital Officers 
Association for a general scheme of Hospital Pensions, aud, after summarizing 
the points raised under certain heads {see par. (7) below), discusses the available 
evidence as to the extent and limitations of the existing provision under each 
of those heads. 

(2) After dealing briefly with the extent to which the general principle of granting 
pensions has now been recognized by Hospitals and by the three great Hospital 
Funds, the Report analyses the particulars furnished by the London Hospitals 
of pensions paid in 1913 to Officers other than Hurwi. For the purpose of 
comparison the figure taken is the proportion of one year's final salaiy which is 
granted by way of pension for each completed year of service. 

(3) In this connection the Report deals with— 

First, the aggregate statistics of pensions paid at the six Hospitals with 
schemes and the 99 Hospitals without schemes, subdivided according to cause 
of retirement (^e, ill-health, etc.), and according to class of recipient (salaried 

or wage-earning). 

Second, statistics of loss of pensionable service by migration from one 
Hospital to another, with a discussion of the principle involved. 

Third, the question how far the available statistics bear out the complaints 

, of hardship owing to uncertainty and lack of uniformity in the granting of 

pensions. In this direction evidence is found not so much in the amounts of 

such pensions as have been granted as in a tendency to postpone the age of 

retirement. 

Fourth, the derangement of finances to which Hospitals acting separately 
are liable, owing to the high proportion which a single pension may bear to a 
salary list too small for the law of average to operate. 

Fifth, the extent to which the various limitations of the existing provision 
have in fact caused hardship, by reducing the percentage of total pensioners 
to total officers and of total pensions to total salaries, as compared with the 
similar percentages in other services. 

(4) The Report then deals with the special features aflfecting Pensioni for the 
Vvning Staili, viz., first, the small and decreasing proportion of nurses who 
stay continuously in Hospital service ; and, second, the existence of the Royal 
National Pension Fund for Nurses, which is designed to benefit nurses as 
individuals, irrespective of continuity in any one form of employment. 

(6) The existing provision for nmses' pensions at Hospitals is then described under 
three heads : Hospitals with schemes ; Hospitals affiliated to the Royal National 
Pension Fund for Nurses ; and Hospitals without schemes. The statistics of 
pensions paid by Hospitals in 1913 are analysed in the same way as those of 
pensions paid to other officers, and the evidence received from witnesses 
familiar with the needs of nurses is discussed. 



•mmmm 



186 



SUMMARY OF REPORT. 



Pkrs. 
98-108 



SUMMARY OF RE1»0RT. 



187 



I 



\.i 



1C9-H3 



h 



on" r. "^"u *" T'^^ ""'^' "•■^° ''"°«'"'«<' *" 'hen- calling and placed 
initiate some definite provision for old age • 

re,"to le^ .1 ,h .' "*'''"^ '" *"' "^y" National Fund! 

« I hat policies assuring a minimum pension of Derham ah., „, 

annum be effected foi- the benefit of ail'^oung n^LT^lT 'cotl^ 

n their calling and pl«=ed on responsible work-^y. at thTenTof 

the first year of training. ™ 

(ii) That the pension should begin at. say, age 55, with the option of 

age, to meet the case of nurses capable of further work. On these 

antV T """'"" *''•' ^^'y »"'- ^'""Jo" Hospital subse- 
quently employing the nurse should pay at least one-Lf of te 

premium during service, such contribution to enu« for the benefit of 
«ie assured except in the event of mi«=onduct. or other sufficient ctus^ 
av) That every probationer should enter service on the miderstandinrZ 
the money for her part of the premimn must be prTwTed if d^ 
course by herself or her friends * 

for Elementary Teachers (.« ,«i.. 254) and proposed for Secondai-v 
Whers ,,« par. 27C,, the policy should be heldTcept. ^ps"^ 
the c,^ o marriage or any exceptional circumstances, for O^uirate 
benefit o the assured, who should be encouraged to c;ntinue^»S 
of the full premram on her own account Payment 

The proposed Committee should ascertain the cost of such policies fro™ th. 
Boyal National Fm.d and also from insurance companieV R 
continuing in Hospital service the provision mad"3!rs„ch ^ "h "^ 
would count towards any pension earned under a^tlA" theme T' 
Hospital officers. Such a scheme, however, could not J^ oZL 

XZ r* """" "'' '^^ - '-'»-' ^ene^-^er r^ 



(a) With regard to the extent of the existing provision 

(.) that the principle of pensions for Hospital' employees is generallv 

lauly eained by the officers, though often with the idea of 

;rr^ i7of t c" ^""^ '" '" -*'-*-'• --- 

{..) that at 6 London Hospitals out of 105 from which returns have been 
received this recognition has taken the form of the establishmenVTf 



Pan. 

109-118 

{amid.) 



114.121 



U4 



115 



pension schemes which, while perhaps conferring no legal right, do 
in practice give the officers of these Hospitals reasonable security 
for a pension on a basis resembling that of the old Civil Service 
scheme (pars. 11 to 19), 
and (iii) that at the Hospitals without schemes pensions are, in practice, 
usually granted in case of need by the special act of the managing 
committee. At these Hospitals, taken as a whole, both the number 
of pensioners and the scale of iiensions are proportionately lower 
than at the Hospitals with schemes, and the pension itself may 
sometimes be very small. Nevertheless the Hospital Officers Association 
do not know of any instance of a deserving [KJison after long ser\ice 
being left entirely without a pension, nor has any such case been 
brought to the notice of the Committee (pars. 15, and 20 to 24). 
(b) But, as regards the limitations of the existii^g provision, 

(iv) that, in the absence of any general scheme, migration from one 
Hospital to another involves loss of all claim to a pension in respect 
of previous service. This has the effect either of discouraging 
migration or of imposing hardship both on the officer who migrates 
and on the Hospital to which he goes, e.g., when an enterprising man 
wishes to leave a secure but subordinate position at a large Hospital 
for a higher post at a small one (pars. 25 to 37) 
(v) that at most Hospitals, and especially at the smaller, the prospect of 
pensions is uncertain, not only as to their adequacy and uniformity, 
but, what is probably more important, as to the age when they may 
be expected. The uncertainty thus affects the Hospital officer 
throughout his career — at the outset, when he has to decide 
whether to enter a service subject to this disadvantage, and towards 
the close, when retirement tends to be unduly deferred, to the 
detriment both of the officer and of the institution (pars. 38 to 48) 
(vi) that in all except the largest Hospitals the grant of pensions to 
superior officers is apt to derange the finances, since the amount which 
has to be paid at any small institution, taken by itself, is lai^e in 
comparison with the annual charge for salaries and wages, and there 
is no system by which thid amount is provided for in advance and 
thus apportioned evenl j <«ver ' the period' pf service of the officer 
(par. 49) _ 

and (vii) that the foregoing causes have no doubt operated in serious limitation 
of the provision of pensions, as evidenced by the fact that the total 
amount now being paid is much less than could be expected in such a 
considerable body of employees (pars. 60 to 57). 



(8) The Committee then make Kecommeudationi as to the Alteration or Extension 
of the Existing System. 

As to the general objects to be aimed at they are of opinion 

(1) that a greater security for pensions and facilities for earlier retirement 
would tend not only to satisfy a legitimate desire on the part of Hospital 
officers but also to improve the status of the service and the efficiency of 
the Hospitals. 

(2) that the object desired cannot be fully attained by any development of the 
existing system, but must be approached from the point of view of a 
general scheme in which all the Hospitals should participate. 

(3) that any general scheme for the Hospitals of London, in order to be 
successful, should provide inter alia 

(a) for aggregation of service so as to permit of free migration without loss. 



'f 



FiMTS. 

115 
(eontd.) 



116-119 



190-131 



132.134 



188 SUMMARY OF REPORT. 

(b) that the pension should be claimable at a stated age, so that there 
should be no inducement for the officer or the committee of the 
Hospital to continue employment when, in the interests of either, it 
should be tenninated ; and that at a stated later age retirement should 
ordinarily be obligatory. 

(c) that the pension should bear an adequate relation to the salary and 
period of sei-vice, and should be well secured. 

(d) that the financial provision for pensions should be continuous, so as 
not to derange the finances of the Hospitals. 

(e) that permanent members of the nursing staffs should be included in 
the scheme, subject to the condition mentioned in paragraph 108. 

(f) that the weekly wage staffs, except where the employment is casual, 
should likewise be included ; and also any of the female servant class 
whose service becomes of a permanent kind. 

• 

(9) As to the method ai attaining these objeets, the Committee found great differences 
of opinion between the different parties concerned, and after considering a 
scheme submitted by the Hospital Officers' Association, and one or two 
alternative suggestions for removing the uncertainties and inequalities of the 
existing system, they decided that before any proposals could usefully be 
formulated it was necessary to settle the following fundamental questions : — 

(a) whether the pensions should be wholly or partly provided for before they 
fall due, 

(b) whether the scheme should provide death benefits as well as pensions, 

(c) whether the officers themselves should contribute, 

(d) whether the pensions should be based on the future salaries, which are 
unknown, or 

(e) whether the plan of assuring definite amounts would not be more 
suitable, 

(f) whether it would be feasible to include in the scheme existing officers, 
many of whom are nearing the pension age, or whether it must be limited 
to future appointments, 

(g) whether it would be feasible to give earlier pensions in the event of 
disablement from loss of health ; and 

(h) whether and by what means it would be possible to reconcile the grant of 
pensions by a central body, and more particularly those coming under 
heading (g), with the independence and freedom of internal administration 
to which the Hospitals, and especially the great ones, attach much 
importance. 

(10) As the best way of contributing to the solution of these questions, the Committee 
decided to examine typical pension schemes in other services. The material 
thus collected could be used for a discussion both of general principles and of 
the alternative methods suggested to the Committee. 



PABT n.— A Survey op Vabious Methods of Pboviding Pensions, with a 
Discussion of Typical Schemes albeady in Opebation in cebtain 
Government, Eailway, Educational, Hospital and other Services. 

(11) For the purposes of this survey the Committee classify Pension Scheines 
according to the Method of Financial Provision, viz. : whether the pensions are 
paid out of current revenue, which may be called provision '* in arrear " ; or 
whether they are provided for during the working life of the officer, i.e., " in 



SUMMARY OF REPORT. 



1B9 



Pan. 
123-134 

(contd.) 



136-134 



185-147 



148-151 



Ui 



advance " ; or whether they are provided partly in advance and partly in arrear. 
The complete classification adopted is as follows : — 
Schemes where the pensions are provided 
I. Wholly in arrear, or, as it is sometimes technically expressed, "by 

assessment " 

(a) on a " salary percentage " basis or scale (i.e., where the pension bears a 
defined ratio to the salary), as in the case of the Civil Service and 
certain of the existing Hospital schemes. 

(b) on a fixed " absolute " scale or " flat rate " {i.e., in definite amounts of 
pension), as in the case of the State Old Age Pensions. 

II. Partly in advance and partly in arrear 

(c) on a salary percentage scale, as in the case of the Police, the Poor 
Law Officers, and the Asylums Officers Superannuation Acts, and 
various of the Metropolitan Borough Schemes. 

(d) on an absolute scale or flat rate. 

(e) on the " money purchase " principle (i.e., where each pension is 
directly related to the contributions available to purchase it). 

III. Wholly in advance 

(f) on a salary percentage scale, as in the case of many superannuation 
schemes of Railways, Banks and other Corporations. 

(g) on an absolute scale or flat rate. 

(h) on the money purchase principle, as in the case of the Royal National 
Fund for Nurses and the Federated Superannuation System for 
Universities. 

(12) The CJommittee draw attention to the importance of the main heads of their 
classification, as emphasizing the fact that all pensions have to be provided for 
in one way or another, and that it is just as necessary to calculate the ultimate 
cost of the pensions, as compared with the resources out of which they are to 
be paid, when the provision is left to the future as when it is made in advance. 
They also point out that every difference or change in detail is liable either 
directly or indirectly to affect the cost, and should therefore form the subject of 
actuarial calculation beforehand. 

(13) Under the heading Peniioni provided wholly in Arrear the Committee discuss 
the following schemes on the salary percentage scale and non-contributory:— 
(i) The Civil Service System 1859 and 1909. 

The older scheme provided only superannuation, while the newer 
scheme, introduced as the result of experience and accepted by the great 
majority of the beneficiaries, substituted lower pensions with the 
addition of a death benefit and a lump sum on retirement, 
(ii) The existing Hospital Schemes. 

These, tho«gh not legal •contracts, in practice provide pensions on 
approximatefylhe old Civil Service scale. The Committee also deal under 
this head with a suggestion that this method should be extended to other 
Hospitals, the charge being pooled and spread over all the Hospitals joining 
in the scheme, 
(iii) State Old Age Pensions. 



157-160 
161-168 
164-168 



(14) Under the heading Peniioni provided partly in Advance and partly in 

the Committee discuss the following schemes, all on the salary percentage basis, 
and all contributory : — 
(iv) Police Officers* Scheme, 
(v) Poor Law Officers* Scheme, 
(vi) Asylums Officers* Scheme. 



190 



Pius. 
157-169 



SUMMARY OF REPOKT. 



171-181 



18 J 193 



194-215 



218-228 



229-240 



241-248 



It 



253-257 



'^^^^^SSZ.a:^^ "^ ^'' '" ->-- '^"e the 
(vii) The Metropolitan 80^X^1" " ''" "" ''"' '"'»"• 
These began with employees' enntrik,,.- 
nominal employers' contnbuC T" "'""'""' ""^^'""'* »"<''""««''? 
the latest iche^es the emZe^ T ™'^«'-<"y *-P~ved until in 
though still not wholly, in ZlTce '""'""""»« "- P^-^ very largely, 
(vn.) The London County Council Superannuation System 

^.test^ewerrsriic': ''ZT' '"'" ' »--'- '-^ - 

advance. Serious de6cits how^"^ '", -^^^t'tute adequate p«,viBion in 
of pensioners, were so<^n reS t^^^ '" '"« '"^-v^i '-gevity 
increased contributions neceZ^l,^'^ subsequent valuation, and made 
undertaking the liability in ZLtTex"f " '"'T'' '''' '^'""''' ''-'' 
is to make provision in Lvance^LI ! '°^ "'*'"'^"'- ^"^ 8«"«™' ""» 
obligations '""*'"""="™''">*ith the liquidation of earlier 

(ix) The New Zealand Govemmpni «., 

Tn th^ . *''""*''t Sujrerannuation Funds 

contriburin^tree V:r TJT^ "f .'^ '"""' '"^ '^^ 
have prov^ on actuarial v^lurnVLToJly •"n^^tr''"'"' '— 

"'' t""'<^.oS„?:::f;rr4rhi:'':^ *" ^~-- ^^^ ^-"»- *— 

(X) The Railway Superannuation Schemes in the United Kingdom 

arisen, due partly to abLZ of ? ^ *" '"'^* '"" """> ^ "me 

of the origiLi iZ^^X o r ";''::!'"? "' "•* '»'" »"«'»°' 

duced without previous 'vaTnatL T^ '*'"'*'" subsequently intro- 
conditions. such' Jl^^ '^ri? T ^^ %r^^ '" '"* 
pensioners; and partly to volnnt,r! K mcreased longevity of 

^"' '''"Thtrnd'"'':^"! ''^*^" «"P«™-uation Fund. 

pre.ntst"ri\srs:::;tn:::trtr™""-'-^^ 

rJi^CirelSerr;--:—^ 

fund of differences in PicTt he ml "'*/""""'" *««" »" the joint 

„ as well as the deficitsThr:;:^:"^" ^^^^H '-. "•■"-■"'. 

Similar causes. 'ongevity of pensioners and 

(xii) The scheme submitted by the Hospital Office.^ Association ~ 

contributions. ****" solely by employers' 

(16) The Committee then consider under the same head the follow u 

the money purchase principle •— followmg schemes on 

(xiii) The Elementary School Teachers' Deferred Annuity Fund 
Ihis mutual fund nn ♦».« ... , "^ ^^^a. 

contributions of fixed lit LmT ""f "^ P""'='P'* '' """^^ ^y 
purchasing a portion otTilLTJlT^^'Tr''' *'<"' '''"'Wbution 
to tables revised from t,me "Z'Z'^J:^:!^^ -^"^""^ 



SUMMARY OF REPORT. 



191 



P»n. 
358-271 



i72.278 



279-292 



298-902 



803-312 



81S-837 



(xiv) The Federated Superannuation System for Universities. 

This scheme provides pensions, not by a mutual fund, but by policies 
taken out with insurance companies. The premiums are paid partly by the 
officer and partly by the institution, the latter being aided at the outset by 
a Government grant. The policy goes with the officer on migration to 
another institution within the scheme. The scheme does not proN-ide 
fully for disablement benefit or allow for past services of existing staffs. 
Whatever is provided is paid for in advance and guaranteed by an insurance 
company. The Committee give figures comparing the amount of pension 
that is provided for a given rate of contribution under this system, 
under the old Civil Service scale, and under the scheme submitted by the 
Hospital Officers respectively, 
(xv) The System recommended for Secondary Teachers. 

This system, drawn up by a Departmental Committee, is on the same 
lines as the Universities System, supplemented by State assistance direct to 
the pensioners in the fonn of superannuation and disablement allowances, 
(xvi) Scheme recommended for Officei-s of Reformatory and Industrial Schools. 
Here again a Departmental Committee has recommended a contributory 
scheme of deferred annuities by means of policies with insurance 
companies ; with supplementary free pensions for existing officers of over 
40, purchased by the local authority with State assistance, 
(xvii) The Royal National Pension Fund for Nurses. 

This is a mutual society for the grant of annuities provided by 
contributions and supplemented by bonuses arising out of profits and 
capital donations received. There is a federation scheme for Hospitals 
willing to pay part of their nurses' premiums ; and there is also a sei^arate 
sick benefit fund. The Committee compare the pensions offered by the 
Fund with those obtainable from insurance companies, 
(xviii) New South Wales proposed Superannuation Fund. 

This scheme, prepared by a Departmental Committee, proposes to 
provide, for State and municipal officers, pensions based on the money 
purchase principle, but adjusted so as to bear some relation to the salary. 
The pension scale of benefits is also based on family need, and therefore 
includes annuities to disabled officers and to widows. The contribution 
necessary to provide the pension is to be variable, being calculated 
separately in each case, and is to be shared equally between employer and 
employee. For officers over 30 the scheme is only partially compulsory. 
A State guarantee would be necessary, 
(xix) Scheme submitted by Mr, Tinner, F.I. A. 

This scheme proposes a mutual fund created by equal annual 
contributions from employers and employees; the pension is calculated 
for each officer on the money purchase principle and is payable to him 
on retirement, whether at the normal pension age or earlier through 
ill-health. The Report compares this scheme with the .method of policies 
with insurance companies, both as regards the amount of benefits provided 
and as regards security. 

PART III. — Discussion of the Fundamental Questions involved in any 
General Scheme op Pensions for Hospital Officers and Staffs. 
General Conclusions. Rejection of Mutual Schemes and Final 
Recommendation of Insurance Method, with Separate Provision for 
Disablement. 

(17) This part of the Report opens by discussing, in the light of the information 
collected in Part II, the fundamental questions raised at the end of Part I. 



192 



!i 



Pars. 
329-^35 



S96-839 



m 



340-350 



li 



861-3r/7 



378 



SUMMARY OF REPORT. 

(a) On the question whether the liability should be provided for in advance, 
the Committee arrive at the conclusion that the sound method of 
procedure is 

(i) to recognize that pensions should be regarded in principle as deferred 

pay; 

(ii) from the time of such recognition to set aside proper contributions 

m respect of all future service, whether in respect of officers already 

serving or to be appointed in the future ; and 
(iii) to provide that all such contributions shall be made during the 

working time of the officers concerned, and preferably as and when 

every payment of salary is made. 

(b) On the question whether a ■cheme ihonld include a death benefit, the 
Committee draw attention to the general and increasing adoption of this 
feature, and to the possibility that in certain circumstances its cost may 
be less than is usually supposed. They come to the conclusion that it 
should form a substantial part of any scheme, but should perhaps not be 
entirely obligatory. They also refer to the difficulty arising from the loss 
of this benefit in the event of death occurring shortly after, instead of 
before, the pension age. 

(c) On the question whether beneficiaries should contribute toward the cost 
of the pensions, the Committee point out that the contributory principle 
is becoming general, except where complete control by the employer is 
possible and is desired, or where pensions are regarded not as deferred 
pay but as a reward of long service : and therefore that it tends to 
accompany the development of efficiency and organization in a profession. 
They conclude that a Hospital scheme must be on a contributory basis. 

(d) On the question whether a scheme should provide for existing ofloers, 
^ the Committee point out the great cost of such provision. It has (together 

with improved longevity, of pensioners) been largely responsible for the 
deficits in schemes on the salary percentage scale. The money purchase 
plan, on the other hand, compels the cost to be calculated and faced 
beforehand. After examining the figures of various schemes, and utilizing 
the imperfect information available as to the total pensionable salary list 
of the London Hospitals, the Committee make a provisional estimate of 
about i-450,000 as the cost of providing adequate pensions in respect of 
the past services of existing staffs. Their future service would be dealt 
with in the scheme itself, the benefits thereby received being proportionate 
to the remaining working time of the officer. 



(18) The Report then gives the following Summary of Conclusions as to the Oeneral 
Principles to which, in the special case of the voluntary Hospitals of London, a 
satisfactory pension scheme should conform : — 

(i) That the pension should be claimable by a member of the permanent staflFs 
at 60 or other stated age, so as to facilitate retirement when a man is 
getting past his best. It is also desirable for the same reason that 
retirement should in any event take eflfect at age 65, or some other stated 
age ; and that a pension should be available in the event of permanent loss 
of health. 

(ii) That the pension should be well secured and, in case of long service, 
adequate in amount. It follows from this that it must represent an 
adequate proportion of the salary, 
(iii) That it should be possible for officers to migrate freely from the service of 
one Hospital to that of another within the scheme without forfeiting any 
part of t)ie benefit. 



Si MMARV OF KEPOUT. 



19;] 



Pars. 

378 

{cmtd.) 



879 



380-.S87 



388 



389-397 



(iv) That the [)ensions in respect of all future service should be provided for 
wholly in advance, no liability being left to be met by the Hospitals after 
the officer's service has terminated, 
(v) That, as in the case of tlie Civil Service Suiieramniation Act, 1909, there 
should be some death benefit available for family provision, and also, if 
possible some cash endowment on retirement, but that there should be 
sufficient elasticity in the scheme to meet exceptional eases, 
(vi) That, inasnmch as such substantial benefits as the foregoing would be a 
gieat advantage to the officers, they should be prepared to mjike some 
sacrifice to secure them, and that the scheme should be on a contributon.- 
footing, the contributions dating, as regards the future service of existing 
staffs, from its inception. 

(vii) That such members of the nursing staflFs as remain permanently in the 
service of the Hospitals should be included in the general scheme, any 
provision assured in the separate scheme for \cung nurses (par. 105) counting, 
as far as it will go, towards their ultimate benefit in the general scheme, 
(viii) That the wefekly wage staffs, as well as female servants and scnibbers, 
should likewise l)e included in all cases in which the eiili)loyment is of a 
l)erraanent nature. In these classes it might be necessary to prescribe a 
minininm i)eriod of service. 

(ix) That in all cases the estimated value of emoluments should be added to 
salary or wages for the purpose of reckoning contributions and benefits. 

(x) That the scheme should also provide pensions for the existing staffs in 
respect of their past service as far as fimds for providing the additional cost 
may he available. 

(19) On the question of the Kethod of giving effect to these Conclusions, the Committee 
ix)int out that all types of scheme are obviously unsuitable except those pro^ided 
wholly in advance either on a salary percentage scale or on the money 
purchase principle. 

(20) With regard to the Salary Percentage Method the Committee i>oint out that 
schemes of the type of the London County Council, the New Zealand Govern- 
ment, and the great British Railways, would fulfil many of the conditions. 
On the other hand they draw attention to two drawbacks, financial uncertaintv 
and administrative difficulty. The financial uncertainty results partly from 
the fixing of the pension in relation to salary, and partly from the risk of 
changes in the rate of interest, the rate of mortality and other speculative 
elements, which experience shows often to have resulted in actuarial deficits. 
The method, therefore, requires external financial support capable of assumin^^ 
liabilities of large amount. The administrative difficulty arises from the 
necessity for a central committee representing a number of separate institutions. 
No instance has been submitted of a fund successfully working under such 
conditions on the salary percentage basis, and the Committee conclude that a 
solution of the problem must be sought in some other direction. 

(21) The Committee therefore proceed to consider the Money Purchase Principle, 
under three categories, viz. :— Mutual funds for deferred annuities only ; mutual 
funds providing disablement and death benefit also ; and schemes Kised on 
policies with insurance companies. 

(22) Under the heading Mutual Funds for Deferred Annuities only they examine the 
types represented by the Elementary School Teachers Fund and the Eoyal 
National Pension Fund for Nui-ses, and find that in both cases the necessity 
of emphasizing security has led to the adoption of a comparativelv low rate 

N 



Pars. 
3by-397 
{con Id.) 



39ft-408 



402-105 



406-408 



N 



M9-413 




413-4M 



415-427 



^ SUMMAKY OF REPORT. 

of benefit and that though the Royal National Fund has in the past supple- 
mented the fixed benefit by bonuses, its prospects in this respect have bLn 
seriously affected by the unexpected longevity of the pensioners. Though 
attaining secunty, therefore, such funds do not compete with strong insurance 
companies as regards benefits. For the same reason thev do not afford a 
model for a new institution. 

"^* m!!? 7T'' M 'T '^ '**' """•"•■» »"•'"•• '»>« Committee consider 
paiticuUrly Mr. Tinner's scheme, which provides disablement benefit and 
generally complies with the conditions, subject to the fimincial risks inherent 

:^«:irrt ;s ^' "^ ''- '^"•'""'™"^^ ""«-•"- -' ^ -"'-" '""" '- 

Special difficulties arise in this respect out of disablement benefit, because 

the questions of early retirement affect on the one hand the efficiencv of the 

. parhcular Hospitals concerned, and on the other hand the financial ;tability 

that JhTh r '■■ r' °" *'"' •"'"' "' P""'''^'* '"« Committee conclude 
Swet t^' ^™>n,s rative and the financial responsibility for disablement, as 
between the Hospitals and any central pension organization ought to rest 
primarily with the individual Hospital. b i ■<■« 

Mr. Tinner's scheme avoids the uncertainties peculiar to the salarv 
percentage method, but remains liable to the financial risks attaching to 
^e operations of such a fund, and to the actuarial risk of increased longevity 
He therefore has no option but to leave the finally adjusted scale of benefits 
to be determined by events. The Committee defer their conclusion on this 

menTCefit. '"'' '""^'""^ "" »"«™'"'^'' ™«'°<>'' "f »ecuring disable- 

(24) In regard to S<di«Det baMd «> laiuruw. P»UdM the Committee point out — 
(1) that there is a great saving in administrative labour and expense 
(11) that as there is no fund, there can be no loss on securities 
(m) that there is no need for actuarial valuations nor r<^m for financial 

and (iv) that subject to acceptance of the deferred pay principle (,« pars. 270 and 
412) the beneficiary, on migration to any institution not within the scheme 
has the option of continuing the policy or pohcies either at his own expensj 
or by arrangement with his new employers 

Ittif rff ,r>1r'*'' ."7*™"*^ System as the type, the Committee 
find that It fulfils the reqmred conditions subject to the following reservations — 

(a) that the security for the pensions depends mainly on the solvency and 

,K> n^' ^", ""^ P"**' "' "■« ^'*<=t*^ i°™™°<» companies. 

(b) that while the pensions, pure and simple, have been shown to be adequate 

"•7*°"''^ "'^o ^ '"'«««''» when supplemented by the death benefit ' 
(c) that It does not provide a satisfactory pension in the event of premaiure 
disablement from a breakdown of health. 

(25) On the question of the security offered, the Committee point out that no 
^eat insurance company has failed since the Act of 1870 was passed that 
the war will have tested them under the most adverse circumsZi. ^.d 
that for annuities the security is even better than for insurances. 

(26) On the question of the adequacy of the pensions, the Committee, having 
a ready shown that without death benefit they compaie favourably with t^ 

f^n Ur •"'"" *'" P"- '" '""> "'^^ """^ P"- 265 of Report), now 
find that while a much larger death benefit is provided than under the new Civil 
bcrv.ce Scheme, the pensions at age 60 are lower, though not inadequate and 



415-4*27 
{contd.) 



428-4H5 



486-438 



439-469 



470 



471-474 



ST^MM.XRY OF REPOllt. 



11)3 



at ape 05 are higher. Comparisons are also given witli tlie Hospital Ofticei-N* 
scheme and Mr. Tinner's scheme and show on the whole a remarkable 
similarity. The Committee conclude that the insurance method cannot be 
ruled out on the ground of inadequacy so long as the joint contributions 
amount to 10 i>er cent, of salary. 

(27) On the question of the insufficient disablement benefit, the Committee first 
refer to their previous conclusion that this benefit ought in any case to be 
administered by the Hospitals themselves (cf. par. 23 above and pars. 402-0 
of the Keport) as is already done, though inadequately. They then show that 
under an insurance scheme, there being a certain amount of pension ali-eady 
purchased with the past contributions, the supplementary liability in any 
particular case can be limited. 

(28) As to the method of meeting this liability outside the scheme, the Committee 
suggest that the individual Hospitals should be assisted by a representative 
central body, which would in effect be the Associated Hospitals acting in 
combination for this si)ecial purpose. 

"M As to the cost of disablement pensions, the Committee fii-st fix on a suitable 
standard of disablement pensions which might be substituted for the amounts 
secured under the Universities system. Different lines of enquiry combine 
to suggest that the cost in advance of such pensions might be reckonetl 
[uovisionally at about one and a half per cent, of the annual salaries ; and this 
measure of cost may be applied not only to new entrants coming on the 
scheme in respect of future appointments but also to an existing staff in 
respect of its future service. They then adduce actuarial opinion to the effect 
that if the pensions were to be administered by a central body in the manner 
outlined it would be possible to reduce the ultimate net cost after allowing for 
the amount secured under the Universities system to a figure much less than the 
foregoing. To attain this result the insurance policies which are effected under 
the Universities plan would, on disablement, be handed over to the central 
body to be maintained in full force until maturity instead of being discon- 
tinued. The increased value of the death benefits, arising from the fact that the 
disabled have a reduced expectation of life, would thus go to the central body 
instead of reverting to the insurance companies, and could be used, after 
satisfying the legitimate claims of dependants, for reducing the cost of 
disablement pensions. The estimate of cost arrived at is approximately 1-5,000 
per annum at the outset, falling in time to £*2,000 or 41,500 per annum in 
respect of a supposed total salary list of £300,000. 

(80) The Committee conclude that, the separate treatment of disablement being not 
only desimble but practicable, a scheme of the type adopted by the Federatetl 
Universities would be a practicable solution of the question for the Hospitals 
of London, and that such a system either complies or is capable of being 
adjusted to comply with the various conditions laid down. 

(31) The Committee then make a Pinal Comparwon of the Mutual and Insurance Methods 
of applying the money purchase principle, dealing separately with adminis- 
trative and actuarial considerations. 

On the administrative side, they consider that the advantage of including 
disablement benefit in one mutual fund is outweighed by the special risks 
involved in the administration of that benefit. In all other respects the 
advantage rests with the insurance method, which avoids the necessity for 
managing a large fund, and also facilitates migration from one institution 
to another or the inclusion of fresh institutions. 

y2 



h 



196 



SUMMARY OF REPORT. 



Pars. 
475-477 



i« 



478-480 



481-487 



488-490 



II, 



r ded t ll. I w'' 'T'"""'"''' """ ""'•='' -'"»'»™ -«" ^ith those 
KSe'whT'f %?'??'* ""''"' ""'" "--"'-only what can 

adv^ates of „ „„t„a, f„„a „ave put forward no evidence in sulrt'ora 
d^rent prospect for the fntnre; and the Committee have quoJdTmels 
cases where d,«tppomtme„t and hardship have only been averted bvhThl 
of extraneous financial assistance on a large scale. «">? me help 

(32) The Committee, therefore, conclude with Hejeotion of the Kntoal is^..- , 
nnle. a sufficient financial ._tee can he prolideTl!; th^utu^^'d' 
hi theT:; """-'S';"."- ««■"-*-. If King Edward-s HospUl S 

mth? J ^ ^T ""'' '" ''■'""^ *" ^""^^^ 'he guarantee, the qu J on 
might be reconsidered, but in view of the large sums whiohtTT^ 

Committee should not make itself in any way responsible for appr^Sl 

:^ntyt:r;r^s " " "^-- - » ^-- «— " •« 

(33) The Committee then arrive at the Knal C.ncl«.i«, that a scheme based 
upon recourse to insurance companies is the onlv possible solti^ o^^ 
supe^^nuation problem before them. They accon^y B.Z^ that a 
joint conference of Hospital representatives should be inviteTT^onl: 
the whole question on that basis. In addition to the Hospital CommitZand 
officers care should be taken that the nursing staffs and wLkly w^g^ ^ a"e 
^parately represented. Experimental calculations should be tos^ on ! 
10 per cent, contribution, each party paying 5 per cent. The scht^ sCid 
be obligatory on new appointments. In the case of ^Tia.i„„ T^^ 
total ^ntribution Should be made .pportiona^^^ 

for each year of futu^ service. This would gradually reduce the ^^ 
the Hospitals of providing their pensions "in arrear" Th. r \. 
recommend that, in order to raise thfstatus of Ho^ servi^ everTyt; rf 
work should be regarded as pensionable with rights vesting accorii„;,; ' Thus 
the benefits of an existing policy should follow the officer on withdrawal »lv 
as wel as on migration to another Hospital. The age of retiremenfrd he 
type of insurance contract would require special consideration, as also wol 
the case of the permanent nursing staffs and the weekly wage sJaffs. 

(34) The Committee also make a 8«ppl»..nt.ry B«>«oi.«,d.ti« „ f IH«blem.nt 
Te^ name y. that the Executive Committee should take intocon^eS 
^best way of making provision for disablement benefits by means IfT^Z 
body constituted and exercising functions in the manner outlin^ "n " " 
graphs 437 and 465, and that the King's Fund should offer its help blwry^; 
advice, or. If thought fit, of pecuniary assistance, possibly in the fiL inll^ 
by offering to obtain actuarial advice as to the feasibility of meeting thl prlbTem 
m the way suggested, and as to the p..bable cost to L centml bo^y^d t^ 
HospitiUs of doing so. It is pointed out that the operations of sTch a Uy 
would be a mitigation of and not an increase to the liability for dTllm^„t 
pensions already resting on the Hospitals. «'6ablement 



Pun. 
1 



8 



1.6 



7.9 



lO-ll 



13-13 



It 



16-16 



'I 'I 



SI MMARY OF DISSENTIENT MEMORANDUM. 197 

SUMMARY OF DISSENTIENT MEMORANDUM 
' Signed by Sir William J. Collins. 

{Prepared bij the Secretary to the Stih-Committce.) 

Sir William Collins regrets that he is unable to concur with the final conclusion 
of the Reix)rt (par. 481), viz., that a scheme based on recourse to insurance companies 
is the only possible solution of the problem before the Committee. He considers 
that the proposed conference of Hospital representatives and officers should not be 
limited in its deliberations to this solution. 

He agrees that the case submitted by the Hospital Officei-s Association, as to 
the inadequacy and uncertainty of the existing provision is, generally speaking, 
made out (par. 109), and that greater security and facilities for pensions would benefit 
both the officers and the Hospitals (par. 115), and i-emarks that the scheme put 
forward by the Hospital Officers Association was for pensions based on the tenus of 
the Civil Service Scheme, 1859, or those of the Asylums Officers Act, 1909, of 
which the latter required contribution from officers and provided for aggi-egation of 
service for the puri)ose of pension (pars. 1(54-I(i8). 

He agrees with the summary of general principles [par. 115 (8)] as developed 
in paragraph 878, except possibly as to the death benefit, but \^ould leave the claims 
of the alternative methods of solution for acceptance or rejection by tlie imrties 
immediately concerned. 

He then refei-s to the rejection in the lieport of all schemes except those on 
the money purchase principle either by way of mutual fund or by the method of 
purchasing benefits from insurance companies ; and to the rejection of Mr. Tinner's 
scheme for a mutual fund, based on " cautious and conservative " estimates though 
providing for disablement benefits, on the grounds put forward in the Report that 
it is not feasible without a financial guarantee and that under no circumstances 
should the King's Fund be recommended to provide such guarantee. The 
Universities system of insurance policies was opposed by the Hospital Officers 
Association on the ground of death benefit and of expense (par. 2G0) ; and it does 
not provide for disablement (par. 428). To remedy the latter defect a central body 
is to be set up which the King's Fund might support, possibly by money 
contributions (pars. 430-7), and the Report suggests that the liability might be 
reduced by a somewhat speculative scheme for the " nursing " of policies, but is 
subject to " uncertainty " (pars. 464-9). 

Hence both the mutual method and the insurance policy method require in 
whole or in part the administrative and financial aid of a central body possessing 
the confidence of the Hospitals. 

King Edward's Hospital Fund has large invested funds and has certain powers 
under its special Act of Parliament. The Report admits that if the King's Fund 
were willing to provide the guarantee, the feasibility of the principle of a mutual 
fund might be reconsidered (par. 480) ; and, in connection with existing staffs, suggests 
that special donations might be forthcoming (par. 374). 

Pensions being already regardi?d by the King's Fund as a legitimate expenditure 
of Hospital money, and the King's Fund having statutory powder to use its general 
or special funds in support of this object, there is no insuperable objection to its 
rendering assistance to the Hospitals in this respect. 

Sir William Collins, therefore, does not regard the final conclusion as established, 
viz., that recourse to insurance companies supplemented by a subsidized scheme 
of disablement benefit is the only possible solution. He would prefer that the 
suggested joint conference of Hospital representatives and officers should be in a 
position to consider the alternattves presented in the Report without being restricted 
in their deliberations and choice to one particular methodi admittedly inadequate 
by itself, of meeting their requirements. 



j{ 



>li 



w 



i« 



APrENDICE8. 



200 



APPENDICES. 



PENSION SCHEMES AT VAKIOl'S HOSPITALS. 



'Ml 



APPENDIX I. 

THE IN-COBPORATED ASSOCI.mON OF HOSPim OFFICEBS. 

Cask roa a Geskbal Schkm. or Pb.vs.o.ss ron Hoshta. E«„.ovb«. 

partt, Ho^i'tS™ ?„?: :^-^--"^I•---•e recog„i«„ as a .egiU„..e 

as tolhtr '"Zlm~^^^^^^ rr '^ '■" '^^ -»<'' <" H-P-'^ oflioen. 

changing Board, and «hile ona wtT 1 , i °''' "*"""' " ''«P«nJent on a 

^ward. another equally meritoriorsw" " ' '"' '""'"'">• -"'^ «««"™ « i«»' 

favourable, or ^4o^J^" Uv^ro'sTtr T 'V"""""^ "'"" ---'^nces are less 
recognition of a We o, hard „1 and devoLt"" " '" "'' '"^' *'^'' "'" °'"*'- — ' 

hardship. IUsgreat^.trthe;l\ :' ,;'4;rr^^^^^ " ' ™^ -> 

one to another, and anything that tends t„T 7.! ""''' P"' '"«'>' '"^ 

losing a pension altogether of the natu™. ^ '°°"'"*'"- """' " ""> '«« <" 

detrin^ental to the H^pitl Z XZT^ »-•"■-«"- '» sacrifice a peri«l of service, is 

Hosis^lZLl" wralrihe"™ r' "■"!'""'' "°° «»« 'o «»« bjtbe 
afford to burden then,selve 1^ the hi; a'^r ■ "^ f "^'"'' "'"^''"^"y --<" 
pensions involves. So it might hannen Z ^ . <'»P«'"l'"'re which the payment of 
old servant, .hose work coufd b ^2 and n Tk' """ '^ "«' '^'«''"<'° <" - 
-hUe the old employee would st™fi!Lo„ """' ^f .^"y --'«1 by a younger man, 
ahould be deprived of the wherewiS^llrl'rif h^ld ^ '"""^'- ^ "« 

aaeouVXn ^^ :^^;::^,r:::zt:' °" "'^' ^'-'- ^' -«- - 

suffer as long as the pension continued. " '^""' """' "•"«»' »«"»«% 

institution, thereToU:^^ SrasTol "^ T" r '"^ ''"""o «'«'«- <" an ' 
aifliculties and hardships woZ:' :r ul 17 Zf: f^'"' '"' ""« "'"ve-entioned 
or regular e=,«nditure that constitutes the diffioultv. '*""''°' ■"■' "°' " "^'i-'o"" 

attraUo irHotStr, InCZ! Ir o^' ' ^""^ ''•" "' ^^ "■-■" •>• 
treatment, would conduce materially to thaTeTd '^""''"'' ™'"""8 """"""y »' 

8. Pension schemes have been estabhshe,) „r., < , , . 
also for those who work in important t^^^iitJ^'J^' "'r'"' ''"'^'°^^' »-" 
Companies, Railways and Docks. Therrrms L" *!,' '""' " ^"'"' ^'"^""o 

employed in Hospitals, which do so muTfor the .''"'°'' " "'^ '""^ "'«' "" 

treatment. In this connection we Could nail . T""""' '"°"''' "^"o «-»"' 
o.cials Whose work is very similar to trafof^rri^rt",; ^ f^ "" ^"•^•'""• 

.^c. !, ml tr:,,t1i:Xu--: Ho^^^^^^^^ ^asedon the Superannuation 
;-; based on the terms of tljJt.tTtre \^ ^Jt;Z:ZZl^ 



APPENDIX II. 



ABSTRACT OF PENSION SCHEMES IN OPERATION AT VARIOUS 

HOSPITALS. 

Note. — Formulated rules or recommeiidations for the guidance of House Committee^ 
containing detailed conditions, are counted as schemes. 

(a) At Hospitals marked (a) no officer or servant is entitled to a pension as of 
right, and no pension is granted or continues payahle except during the will ami 
pleasure of the Hospital Authorities. 

{b) At Hospitals marked (b) tJie existence of a scheme does not necessarilif 
imply that any officer or servant is entitled to a pension as of right, or that any 
pension is granted or continues jjayable except during the will and pleasure of the 
Hospital AutJiorities. ^ 

1. Canc-eb Hospital (a) : 

Pensions may be granted 

(a) in case of ill-health, after 10 years' service, 

(b) at 60, if unfit, after 25 years' service, 

(c) at 65, after 25 years' service, 

at the rate of one-sixtieth of average net pay per completed yeai*, not exceeding 
forty-sixtieths of average pay of last three years in lower ranks, or 10 years' pay 
in higher. 

2. Cheyne Hospital (6) {Matrons and Sisters only) : 

Pensions at ages 55 to 60 (unless extended) for matrons, 50 to 55 for sisters, after 
20 years' service, at rate of 50 per cent, of salary and emoluments plus a farther 
2 per cent, for each further completed year up to a maximum of 70 per cent. 

3. Guy's Hospital (a): 

(a) Male Staff : 

Pensions at ages 60 to 65 (unless incapacitated earher or service extended later) 
after 10 years' service, at rate of fifteeii-seventy-fifths of final salarj- and 
emoluments, plus a further one-seventy-fifth for each further year up to a 
maximum of fifty-seventy-fifths after 45 years. Maximum may be granted at 
65 after less than 45 years. 

(b) Nursing and Female Administrative Staff : 

Hospital scheme combined with Federation witii Royal National Pension Fund 

for Nm*ses : 

Pensions at ages 50 to 55 (unless incapacitated earlier or service extended 
later) after 10 years' service, at rate of eleven-forty-fifths of final salar}' and 
emoluments plus one-forty-fifth for each further year up to maximum ot 
thirty-forty-fifths. Maximum may be granted at 55 after less than 30 yeai-s. 
Continuous service with Trained Nurses' Institute counts as Hospital service. 
Beneficiaries (excepting administrative staff, who are recommended, but not 
required, to do so) must take out poUcies with Royal National Pension Fimd 
for Nurses for £7 lOs. at age 50 ; staff nui-ses on appointment, sisters after 
two years. The Hospital takes out policy for £11 5s., which forms part of 
Hospital pension. 

4. London Hospital (a) : 

(a) Lay Staff' (under recouhideratiou i\)i'd) : 

Pensions at ages 60 to 65 (unless incapacitated earlier or service extended later) 
after 20 years' service (unless incapacitated earlier), at minimum rate of so many 
sixtieths of last three years' average i*emuneratiou up to forty-sixtieths. 

(b) Nursing Staff' : 

Pensions equal to full pay ut age 45 after 18 yeai*s' service. 



I 



.INii^ 



20-2 



APPENDICES. 



C. 



8. 



5. MiDDLKBEx Hospital (b) • 

of one-half of pay ; „, o sL^ ' , ""' ' "' " '""'•''^ ""« '<> >-«»". •' «'« 

at m pay. '^ ^ ' ""° "*^ ""O ■»««• •» »Peci«I case,, after 20 yea«- «rvicc, 

PoPLAB Hospital (a) {Sisters an,l Nnrnes anly) ■ 

Pensions equal to full pay at age 45 after 2o' year.' sewice. 

St. Bartholomew's Hospital (a) : 
(a) Male Officers and Servants • 

.a:?:K y;:^:.!" :: ;->- --^^a-^ «.,«... «, .rviee e^tenaea 
e.»o,u.„e„ts fo/.ast\CTea: o Z:'[r7T "' """""' "^"'' '"" 

(b) I't-male Officers and Servants : 

Siiiue as above, but at a*»«« 'it\ ♦«. «a i 

«fty.f„urths. "" -^^ -^ «o •* «»d mte o„e.«fty-f„„rth up to tbi„y.«x. 

St. Geohges Hospital («); 

(a) Officers other than Xumes • 

., . ,, . ^.^ ^ ^^^'^ ""^ ***'*^^^' "P to '"aximuni of forty-sixtieths. 

(b) Cursing Staff: 

Pensions ut age 55, after lb yeai-s' service at r..f^ ^t ... 

value of emoluments (board etc ) perlnTr . T °""'^'^''«''' "^ ?«*> -»<! 

up to n^ximum of forty-s^i^ "'"""""' '"• "^^'^ ^^'^ ^' ---• 



FEDEKATION SCHEMES WITH KOYAL NATIONAL PENSION KrNI». 



•Jl« 



APPENDIX 111. 



SYSTEM OF FEDERATION BETWEEN HOSPITALS AND THE ROYAL 
NATIONAL PENSION FUND FOR NURSES. 

A. TYPICAL SCHEME OF FEDERATION SUGGESTED BY THE ROYAL 

NATIONAL PENSION FUND. 

Extract from the liej)ort of the Committee of the House of Lords on Metropolitan Hospitals. 

" The Committee think it very desirable that, where the funds of tlie 

Hospitals permit, Pensions should lie provided for Nurses by joining the 

Royal National Pension Fund for Nurses, or by tlie Hospital providing a 

special Pension out of its own Funds." 

The Council of the Royal National Pension Fund for Nurses have caused the loUowiiij* 

scheme to be prepared for the consideration of the Managers of those Hospitals, 

Convalescent Homes, Asylums, Nursing Homes, and kindred Institutions, who may desiiv 

to provide Pensions for their Nursing Staff" in accordance with the above i-ecommendatiou 

.of the Loids' Committee. 

Suooested Scheme of Federation. 

1 . The Managers (Court of Governors, Committee) of the * 

(hei-einafter called the Hospital) have decided to federate with the Royal National 
Pension Fund for Nurses (hereinafter called the Fund), in order to assist the Matron, 
Superintendent of Nurses, and all Sisters, Staff Nurses, Nurses, and Private Nui-ses of the 
Hospital, under forty years of age, who may desire to join the Fund by paying a 
propoition of their annual premiums while they remain in the senice of the Hospital, 
subject to the rules and conditions that from time to time govern the Fund. 

* Nuue o( Hospital or Iiutitutiou. 

Amount of Pension. 

2. The Hospital will take out with tlie Fund a Policy upon the retm-nable scale for a 
Pension of £"' per annum on the life of any Matron, Sister or Nui^se of this 
Hospital under forty yeara of age, who in her own name takes out a Policy with the Fund 
for a Pension of not less than £* making in all a pension of £ 

imv annum. 

* itlO ii* uimektvd Ab a luinimuui for Sibtert> and X'7 Wn. for Nurbes. 

Participation in Pro/its. 

3. .\ Pension Policy taken out by or for the Nui-se will (subject to the rules) 
participate in the profits of the Society and in the Donation Bonus Fund. 

Premium jxt id by the Hospital duriny service only. 

1. The Hospital agrees to continue to pay premiums on the Hospital Policy only so 
long as the Nui*sc remains in the service of the Hospital. 

Mode of Payments. 

5. Premiums will be paid monthly or quarterly through the officer appointed for 
such purpose by the Hospital. A Nurse's acceptance of the Scheme of Federation is 
regflixled as sufficient authority for the deduction from her salary of the premium on her 
Policy. 

Nurses over 40 yearn of Aye. 

G. The Hospital is prepared to consider what help shall be given to Membei*s of the 
Nursing Staff over forty years of age, with the view of making such arrangements as may 
beem best in each individual case. 



204 



APPEXDK ES. 



JKDERATIOX SCHEMES WITH ROYAL NATIONAL PENSION FIND. 



'2o:* 



Withdrawal. 
senile ofthlTos^^r:;!"': T"'"""rO - -""• '-• -" 1-oHcy wLile i„ the 

Assignment to Nurses. 
Hospital ^°''°" ^'^^^ ^"^' ^'- ^*»^«^-^^i«« twelve months after leaving th'e 

•Tben«n,be,ofyea.V.enieeto..efl,edbyU.eComa.i«eoi„«u.hc.«, Pivevea«H , 

♦. T,r , , e*cnc*K». Fiveye»r8hwbeen.ii,Ke«u..da«ainlnununi. 

iuu> be as8igued to the Nur«, • - considered bv the Managcrn. The HonpiUil PoUcy 

l>iscrelio» of Commiltee a, to .im,j„„,c„t 

* The time to be fixed a. iu ReKulation 8. 

Mode of Assignment. 

J mi TO ner, and to register the endorsement with the Fund. 

Polidc, .mrcndered Momj to Uo>p,tat CommUUc 

forfei"he?:^;hi:oVh:tit7r:i'h:" '"^ ^t^"*' ^°«"^ '» "••' ^ »-^^-- 

r«emiun>s ««oh shall hapten jfdlet Tl"T^ *" "*" ^"""^ " ^'■"''«- '"'' "J' 
of deposit, be placed to thl c^t!^ h t^jS F^Vtr k"""'" '""" '"* '^'"« 
iederaUng with the Fund, to aceuniuuLrnTel^Ind to be d T.'f " '"'""''" 
o. .suction i.. aeeordanee with the foUowin^ri': oT tt^; ^^^^h' 

Assoc.at.on. These objects .nclnde Pensions. Sick Pay. Gr.t.Utie.. and 
Co„M,.tio,n by .y..ne after ka.n,, Uo.,.u,l a,.., Ufo.e J„/y„„«,, 

Hos;.Li:.i;isr;:r.:nr::uor^^^^^ 

become entitled to the fuU benefit of th« h . •. , * .."^"'^ .' Hospital, and still not 

p».iun.sattheK..rse.saispo::ri::ir:tiTj:^t-;:ir "" ""' ^-^ 



Power to alter Amount of Contribution. 

13. The Hospital reserves to itself power to alter the amount of its contributions, if 
it should he necessary to do so hereafter. 



N.B.— It should be understood that not only Nui-ses but all other officials employed in the 
work of any Hospital or Institution are eligible to join the Royal National Pension 
Fund individually or on the principle of proportionate payment, and to share in the 
profit Bonuses, though not in the benefits of the Donation Bonus Fund. 

Nurses may take out additional Policies on their own account for either Pension or 
Sick Pay at their option. 

Probationers can enter on their own account, and when promoted to the staff are 
eligible to have a Policy taken for them as indicated in the above scheme of Federation. 

It is hoped that the Hospital will encourage Pi-obationers to enter ; thus encouraging 
earlv thrift, and assuring the advantages offered by the Fund at a lower i-at« of premium. 



B. ABSTRACT OF EXISTING SCHEMES OF FEDER.\TION. 

DRBADNOUaHT HOSPITAL: 

The Hospital pays half the premium for a policy of £15 at age 60 if accepted by 
the nurse during her first 12 months : after 10 years' service, the Hospital pays 
the whole premium for £20 at age 60. 

King's College Hospital: 

Hospital takes out policy for £11 Ss. Od. at age 55 with R.N.P.F.N., or some Life 
Assurance office, for any certificated member of the nursing staff who does the 
same. 

Paddivqton Gbeen Children's Hospital : 

The Hospital pays the premium for a policy of £11 5s. Od. at age 50, for any sister 
or nurse, two years in the service of the Hospital, who takes another similar 
policy. 

RoY.\L Free Hospital: 

The Hospital pays half the premium for a policy of £22 10s. Od. at age 50, 55 
or 60 for any certificated nurse in the service of the Hospital. 

QuKKN Charlotte's Lying-in Hospital : 

The Hospital takes out a policy for £11 5s. Od. at age 50 or 55 for any matron, 
sister or staff nurse doing the same within six months of entering the ser^-ice of 
the Hospital. 

St.. Mary's Hospital : 

The Hospital takes out a policy for £11 5s. Od. at age 50 on returnable scale for 
any sister or staff nurse doing the same. Probationer taking policj' of £22 10s. Od. 
will, on becoming staff nurse, receive back half the premium she has paid. 



See also Guy's Hospital : Combined Hospital and Federation scheme : 
Appendix II. No. 3 (b). 



206 

APPENDICES. 

APPENDIX IV. 

SCHEDULE OF PENSIONS PAID AT TTtTT^t. 

I- Oppicebs othkr than Nursks. 
..^l_£^^Pi^^J«with Schemen. 



Rank. 



Secretary 
Agent ... 
Dispenser 

Siirger}' Beadle 

Dispenser 

Surveyor 

Storekeeper 

£Jngineer 

C'lerk and Enquiry Oflii 

Museum Keeper 

Instrument Keeper 

Carpenter 

Porter ... 

^f essengei- 

fial)ourer 

Engineer 

Cai-penter 
Labourer 
O.P.Porter 
Painter... 

Matron Laundn Hostel 
Porter ... 

Head I-Aundress 

Liftman 

Labourer 

Assistant in Linen Room 

ociubber 

Cleaner ... 

Scrubber 



Ward maid 

••• ... 

Hadiograplier (lav) 

Clerk (female) .'^ - 

Gatekeeper 

Senior Stoker 

Caretaker, late O.P. Porter 

DispensaiT Porter 

O.P. Porter 

Porter ... 

••• 

P.M. Porter 



Cause of 
Retire nipnt. 



Age 



cei- 



Ill-health 



Injury 



Age at 
Retirement. 



do 
70 
fiO 



66 

61 
60 

78 
6o 

m 

65 
60 

m 

66 

72 

7H 

70 

57 

64 

5.') 

62 

55 

82 

73 

71 

65 



67 



40 
49 
62 



51 
60 



t Years of 
Service. 



I Final 
I Salarj-. 

~~£ 8. d. 

750 

500 

300 

280 

250 

210 

169 

152 1 8 

150 

150 

150 
124 16 I 
121 10 I 
119 4 
119 I 
118 6 I 
114 8 ! 
105 
104 
101 
96 4 
95 
77 7 I 
76 , 
70 4 i 
67 12 
36 8 I 
28 12 ' 
28 12 ! 
28 12 ' 
26 I 
26 
26 I 



Penwon. 

'^ iTd. 
550 
300 
150 
I 140 
52 
170 
[ 104 
92 6 
78 
100 
82 
50 17 
67 12 
81 18 
39 13 
59 12 (i 
75 8 
70 4 
20 16 
52 
61 15 
43 6 H 
32 10 
26 
41 12 

20 16 

21 4 
13 

18 5 

18 5 

7 16 

13 

18 4 



14 



260 
122 10 
103 12 
94 18 
84 10 
80 12 
72 16 
63 14 



250 

46 9 

66 14 8 

42 18 

52 

52 

36 H 

26 



104 ■ 24 



5 



^ Hospitals without Sche 



Mies. 



Kinik. 



Cause of 
Retirement. 



Secretarv 



Chaplain 
Chief Dispenser 
Chaplain 
Engineer 
House Steward 
Engineer 
Carpenter, <tc. ..." 
O.P. Porter 

Carpenter 
Ambulance Porter 



Age at I Years of 
Retirement. , Ser\ice. 



Age 

»• 

n 
»» 
»» 

»» 

»t 

t» 

>» 

f» 

>t 

>« 

t» 




t'n<*ion. 



66 

65 

67 

70 

79 

75 

80 

65 

66 

67 

69 

66 

62 

65 

73 





£ 8. d. 1 


41 


400 ' 


31 


350 


25 


275 0* 


37 


250 1 


30 


200 


33 


140 


45 


50 


28 


156 


19 


130 


21 


105 


24 


101 


36 


79 6 


29 


79 , 


22 


78 ! 


39 i 


72 



M 8.^ 

200 
180 

65 
100 
120 
100 
30 
52 
40 
52 
40 
30 
46 16 
26 
72 




PENSIONS PAID AT LONDON VOLUNTARY HOSPITALS. 

B. Hospitals without Schenjes—^oM/i!w «/></. 



207 



Rank. 



Secretary 

»i ••• 

Engineer 

.Assistant Dispenser 
Engineer 
Collector (female) 
Curator's Assistant 
Head Porter ... 
Linen Keeper ... 
Assistant Dispenser 

Porter 

Dispenser 

Porter 

.Assistant Secretary 



Cause of 
Retirement. 



Age at 
Retirement. 



Years of 
Service. 



Final 
Salarv. 



IVnMon. 



Ill-health 



If 



If 

II 



Secretary 



Dispenser 
Clerk (male) ... 
Head Porter ... 
Baths .Attendant 

Porter 

Housekeeper . . . 
O.P. Attendant 
Charwoman 



Resignation 



Reorganisation 
Ix)ss of memoiT &c. 



and Masseur Reorganisation 



Bath Attendant (female) 



Deafness ' 
I Reorganisation 
'Unable to do work 
I effectively | 
' Reorganisation i 



59 
60 
68 

65 
65 
67 
65 
60 
50 
56 
55 
69 
54 



62 
67 
50 
63 
63 
66 
57 
65 
50 
61 

65 





£ 


s. 


d. 


£ 


s. 


d. 


30 


600 








300 








30 


400 








75 








29 


156 








28 


6 





31 


155 








78 








30 


135 








90 








16 


100 








26 








20 


98 


16 





52 








40 


98 


6 





85 


16 





26 


95 








20 








27 


92 


10 





35 








31 


90 








39 








30 


78 








oo 








16 


62 


b 





32 


10 





10 


52 








16 








35 


600 








450 








23 


500 








350 








51 


500 








S60 








22 


180 








100 








18 


100 








26 








36 


83 


4 





31 


4 





28 


83 


4 





39 








43 


78 








52 








20 


75 








15 





0^ 


21 


35 


2 





30 








22 


33 


16 





13 








40 


23 


8 





18 


4 






• Piirt time appointment. The sum of £05 is the annuity value of a grant ii lieu of [Mansion. 

+ Amount required to qualif}- for Almshouse. 

II. NUBSINO St.\ffs. 
A. Hospitals with Schemes. 



Rank. 



Cause of 
Retirement 



Matron 



Sister ... 

Supt. of Night Nurses 

O.P. Sister 

Sister 

f9 ••• ••• 



Private Nurse 



Sister 



#• 


• • • 


II 


« • • 


ft 


• • • 


♦♦ 


• • • 


M 


« * • 


>t 


« • ■ 


Night 
Nurse 


• • • 

Nurse 


Night 


Nurse 


Nurse 


i> 


M 


••« 


tf 


«•• 


l» 


• • • 


Matror 


I ... 


Sister 


1 • • 




Final 
Salary, etc. 



Pension. 



£ s. d 

300 

250 

150 

120 

120 

110 

104 

100 

100 

95 

95 

95 

95 

94 

90 

90 

90 

86 

86 

82 

78 

74 

70 

70 

68 

67 

67 

65 

64 



Ill-health 



250 

102 

86 









£ s. d. 
150 
150 
80 
70 
40 
60 

54 

40 

41 5 
60 

55 
55 
55 
44 
32 13 4 
55 
35 

35 
30 

40 
26 
30 

36 
26 
21 4 
30 
18 5 
26 
18 5 

52 10 

41 12 
30 



• Including emoluments taken at £.50 for matron or sister, J£40 for nurae. 



\ 



l>Os 



^ I 



APPKNDICES. 



i5. Hospital, affiliated to Royal National Pension F 



un<l for XiuHO! 



Matron .. 

District Midwife 
Sjster ... 



Nnrse . . . 

Matron ... 
Sister . . . 
Nurse . . . 
»? ... 
Matron 
Sister . . . 
Head Sister 

Nurse 

» • • • 
District Midwife 



Rank. 



Matron .. 



Sister 






Matron 



Superintendent 
Matron ... 



Sister 

District Midwife 



Age of 
Retirement. 



Years of 
Sen-ice. 




Final 
Sulary, etc.* 



Pension. 



£ s. d. 

160 

146 

90 

90 

90 

90 

90 

89 
80 
80 
70 

350 

90 
70 
70 

225 
96 
90 : 

80 
70 
70 



^ 8. d. 
25 
18 4 01 
£160 grant II i 
52 
52 
52 
52 
20 
30 
30 
30 

42 Of 

55 O' 

20 

20 

100 

40 

30 

20 
26 

30 Oil 



t To complete purchase of annuity, 

t Annuity value of grant of t'GOO. 

I[ Not included in averages in paragraph IC. 



C. Hospitals without Schemes. 



Cause of 
Retirement. 



Age of 
Retirement. 



Years of 
Service. 




Final 
Salar}-, etc.* 



Pension. 



£ 8. d. 

150 

130 

125 

110 

90 

90 

86 

250 ; 

200 : 

150 

150 

125 

120 t 

100 

100 

90 ' 

50 



40 
52 
52 
£50 
50 
45 
13 

50 
100 
30 
80 
52 
60 
25 
25 
20 
12 



8. d. 





10 
grant |l 

























0(1 



• Including emoluments taken at €50^for matron or sister. 440 for n;;;;r 
' Not nioluded m averages in paragraph 7f.. 



SCHEME SUBMITTED BY HOSPITAT/ OFFICERS* ASSOCIATION. 



209 



APPENDIX V. 



SCHEME OF PENSIONS FOR HOSPITAL OFFICERS. 

Pbepared by the Late Mr. H. W. Manly, F.I.A., for the Hospital 

Officers' Association. 

Proposed Associated Hospitals (Officers') Superannmtion Fund. 

Some time ago I made a Report on suggestions for the establishment of a Hospitals 
Superannuation Fund, the features selected being : — 

(1) That all the Hospitals should join and form an Associated Hospitals* 
Superannuation Fund; 

(2) That the first members should be those persons now in the service of the 
Associated Hospitals, and that all persons entering the service of the Hospitals 
thereafter shall be members ; 

(3) That the pensions of the Officers shall be l/60th of their average salary during 
membership for every year of membership not exceeding 40 ; 

(4) That no superannuation \ye granted for less than 10 years' meraberehip ; 

(5) That no superannuation be granted before a member attains the full age of 60, 
unless incapacitated by accident or bodily or mental infirmity not caused by hi 
own fault ; 

(6) That the Hospitals contribute a percentage of the salaries of all their Officers 
who become members according to scale ; 

(7) That an Officer transferring his services from one Hospital to another shaU be a 
continuing member ; 

(8) That separate Funds be created for Nurses and Female Servants. 

I designed a card on which information relating to every member of the staff of the 
contributing Hospitals was to be supplied. When all the cards were returned they were 
sorted into various classes, of which the following is a summary : — 





Females. 


Males. 


Number of cards received 


... 961 


334 


Nurses 


... 560 


Medical Staff 67 


Female Servants 


... 301 


Clerical Staff (including females) 84 
Male Servants 159 


Pensioners " ... 


... 10 


••» ••• ••• ••• ••• A A 


Sundries 


... 17 


• •• «•• ••* ••• ••• d9 


Deficient information 


... 55 


19 




943 


352 



18 Females included in clerical staff. 

The cards in each class were sorted into ages at entrance, present ages and salaries, 
and also into years of service. Unfortunately, the information in each class, when 
separated, was not sufficient to form the basis of an actuarial investigation, and scarcely 
afforded an indication of what the experience might be. 

The following remarks will give some idea of the cost of superannuation for the 
various classes: — 



i 



i 






^^^ APPENDICES. 

Nurses : 

560 cases. About 130 enter every year; average 8er\'ice, 4 1/3 years. Ages at 
entrance, from 17 to 40; average age at entmnce. about 24. CXit of 560 oases, 
only 9 have served for 20 years and over. 

To provide a pension of £30 a year to those who attain the age of 55, conditionally 
on theur having served for 20 years and over, would cost about 6d. per Nurse 
per month. 

Female Servants: 

301 cases. About 75 enter every year ; average length of sei-vice. 4 years. Ages 
at entrance, from 13 to 57 ; average age at entrance, 21. 

To provide a pension of 10s. a week to those who have served 20 years and 
attamed the age of 55, would cost about 5d. per servant per month. 

In the cases of Nurses and Female servants, I think the contributions should be 
earned to separate funds. The annuities to be granted should not exceed the annual 
income and the eldest should be retired first. It is estimated that the income of the year 
will just meet the annuities payable in the year when the Fund settles down to a nonnal 
condition. When that time arrives, say. 10 years hence, the contributions can be adjusted 
to the actual experience. 

Male Servants : 

159 cases. Ages at entry range from 13 to 64. Average age at entry, about 28 
Average present age, about 37. Wages from £30 to £130 a year. Average wace' 
£78 a year, or 30/- a week. ^ *' 

These are permanent members of the staff and should come under the general scheme. 
Specimens op Rates of Contribution to be paid on Wages op Male Servants. 

ACCORDING TO AgB AT EnTRY TO FuND. 



Age at entry 
to Fund. 


Cuntributiont m 


Single payment down to provide for twck eervioe. 




percentage oi wages. 


One per cent, of total past wages molUpUed by 


20 


H 


u 


90 


^ 


2| 


40 


n 


H 


00 


10 


8 



Medical Oppicers: 

aver7£ll^^°* ^^' ^^^^^'* *^"^^ *8«' ^' Salaries. £30 to £400. 
Dispensers, Male and Female : 

Chaplains: 

4 cases. Average age, 55. Salaries, £25 to £200. .\verage, £100. 

Clerical Stapp: 

84 cases^ Ages at entry, 14 to 54 ; average. 23. Present ages, 16 to 72-' 
average, 37. Salanes, £26 to £525. Average. £182. " «> ^^ . 

AU these might be put into one general fund for Officers. 



SCHEME SUBMITTED BY HOSPITAL OFFICERS* ASSOCIATION. 211 

Specimens of Rates of Contribution to be paid on Salaries of Officers, 

according to Age at Entry to Fund. 



Age at entry 
to Fund. 



20 
SO 
40 

50 



Contribution as 


Single payment down to provide for back service. 


percentage of salary. 


One per cent, of total past salary multiplied by 


5| 


u 


7 


3i 


9i 


51 


m 


9 



All the rates have been based on the assumption that the funds can be invested to 
produce 3| per cent, interest net, after deduction of income tax. 

The above figures will afford a general idea of the contributions requii-ed ; but if the 
funds do not earn 3^ per cent, net, the rates will be higher. 

I am unable to make any estimate of the amount to be paid to date back the pensions 
to entry to service. It will be a large amount— probably £8,000 to £10,000.* 



(Signed) H. W. MANLY. 

Actuary. 



167, Highbury New Park. 

London, N. 
nth October, 1913. 



•Note —This estimate was evidently based on the 1,295 cases of which particulars had been submitted to 
Mr. Manly. The cost for the whole staffs of the London Hospitals (8,797 in number including 
nurses in 1913) would be much larger. 



o2 



**i'i 



212 



APPENDICES. 



• I 



B 



I) 



In 



lite 



n 






. 



APPENDIX VI. 



EXTRACT FROM THE EVIDENCE OF MR. GEORGE KING FIA 
SUBMITTED TO LORD SOUTHWARKS COMMITTEE ON RAILWAY 
SUPERANNUATION FUNDS. TUESDAY. 29th JUNE im 

(Cd. 5484, p. 162.) 

4446 {Chairman.) I believe you are a FeUow of the Institute of Actuaries, and a 
tellow of the Faculty of Actuaries ?— I am. 

4447 You have fiUed many official positions, have you not?-I have been twice 
Vice-President of the Institute of Actuaries, and Thave been actuary for two of the ««at 
insurance companies. 

4448 Would you like to give the names of those companies ?-The Atlas and the 
London Assurance Corporation. I am now a consulting actuary purely. I am consulting 
actuary also to a great many insurance companies, home and colonial and foreign, and I 
^Iwa^yf "^^ ^^ ^ ^"^ ''^'^y "^^^ '^^^y pension funds as consulting actuary to the 

4449 Have you had great experience in connection with pension funds genenJly ?- 
Yes. of all kinds. ** ^ 

4450 Would you describe to us under different headings the sort of funds with which 
you have been associated ?-I group them broadly into five classes. 

~ . ^^^]- Please state what those five classes are?-One is the Provident Fund, which is 
a kind of savings bank only; then there is the Fixed Pension Fund, whore the actual fixed 
pension is like purchasing an annuity, the annuity deferred; then there is a Definite 
l-ension Fund. That is where the pensions depend more or less upon salary, but it is the 
salary at the time that it is being drawn that fixes the pension. The deductions from salary 
are set up to purchase definite annuities. Then there are the two that are more intimatehr 
connected-the Superannuation Fund where the pension depends upon the salary at or 
about the ime the member is placed on pension, and the other where it dependTon the 
average salary throughout the whole duration of the service 

««n 'f I ^ f "^ ?' Committee would like you now to deal with these Funds under their 
separate headings at some length ?— 

A. Provident Fnnd.-Under this plan the contributions, whether paid by the member 
or the emp oyer, are accumulated at interest to the credit of the individual member and 
areavailabeat any time for his benefit. They may be paid out to him in cash or be 
applied to the purchase of an annuity, or used in any other way. The plan is merely a 

Zlme^f T''"'°!; 7'"* ' '^"^^^' '' *'^ P^^'^ '^"-«^ - Canada for Ih^ 
Government employees, and the Government does not make any contribution. Under 

^ese circumstances the plan is quite stable and there are no fluctuations; and Tt U 
equitab e. e^h employee receiving with interest exactly the equivalent of what he has paid 
in ; bu It does not open^te in any sense of the words as a Supen^nnuation Fund f^Ta 
sTotltf ^.';*'P^*^7^^^r^"^lv«-o™™ended by myself in a case which was rather 
special, ^here i would work equitably, and possess elasticity. But in that ca^ the 
sa^anesvary only verj^ little, and the annual contribution is uniform for each memlLr 
The annuity which can be secured at the retiring age of 60 therefore bears practicaUy a 
direct proportion to the terminal salary, depending only on duration of service which ^^s^ 
IS nearly uni^rm. about 35 years, and on the rate of interest. The number ;f mem^" 

thoselT h "'' ' ''' '^"™^" "'"^^ "^"^'^ «"PP^^ »--'- ^ -<J. therefore^ 
those cases where pensions would be granted, the accumulated capital would be employ^ 

to purchase annuities from a company. Thi. plan is discussed in some detail in the Llrt 

of the Commission on the Central South African Railways, of which a copy has Cn 

handed to the Committee, and to which special attention is caUed ; and the Commis^o^.^ 

ruled 1 out as unsmted to a railway staff. In a railway service the employees submit to " 

equal to the aggregate of these deductions, and also guarantees a good rate of interest ' 



EVIDENCE OF MK. ii. KING (LORD SOUTHWARK's COMMIITEE). 213 

■ay 4 per cent., on the accumulations of the Fund. The contributions of the employees 
Kte returnable under almost every conceivable circumstance, but the contributions of the 
company are not returnable, unless perhaps by doubling the return of the members 
contributions on death before superannuation, and those corresponding to the contributions 
of an employee who secedes remain in the Fund to increase the sum available for those 
members who continue until the normal age of retirement. Thus, in the case of a 
l>rovident Fund, a very uncertain bonus element is introduced; and, to maintain 
uniformity of benefits from period to period, actuarial investigations are necessar>-. and 
rates of withdrawal, etc., have to be taken into a^unt. Therefore the various disturbmg 
factors which are found in ordinary Superannuation Funds appear unavoidably m a 
Provident Fund. As an example of a Fund of this class that of the Great North«ii 
Railway, CUss II.. Gross Payment Division, may be cited. But the main objection to the 
Provident Fund plan is that, unless the circumstances be very special, it ignores entirely 
the objects which induce the company to subsidise the Fund. As actuarial adviser to the 
Commission on the Central South African Railways, I had correspondence on this pomt 
with the Secretary, which is summarised in the Report of the Commission, and which 
may therefore without impropriety be made use of on the present occasion. The figures 
are taken from the tables prepared for the Central South African Railways, which are 
identical in principle with, and simUar in actual values to. those of many of the Railway 
Superannuation Funds of the United Kingdom. An employee of the Railway 
Administration, who took exception to the scheme of basing pensions on average sallies, 
and advocated the Provident Fund method, put forwai-d the imaginary case of John Hart, 
entering at age 20 at a salary of £200. and remaining at the same salary until retirement at 
age 60. and in doing so he said that " the object of the Railway Administration m paying 
£ for £ on John Hart's contributions is to provide him with sufficient to maintain himself 
when he reaches the prescribed age for retirement." The contributions are 3 per cent, by 
the member, and 8 per cent, by the Administration, and these, without bonus, would 
amount to £1,174 at age 60, or sufficient to provide a pension of about £113. The objector 
did not attempt to measure the bonus, but by examining the scales of pension on the 
terminal and the average salary plans, it has been calculated very roughly that m such a 
case as that of John Hart the Provident Fund might yield a pension of about £180 
including bonus. Now, on the terminal salary basis, the pension would be £133 6s. 8d., 
or on the average salary basis it would be £160 ; so that John Hart would be better off 
with the Provident Fund than with an ordinary Superannuation Fund. But John Hart 
must have been a very indifferent sei-vant to remain at his minimum salary aU his Ufe. and, 
so long as he has enough, he is not one of those to be encouraged by a large pension. The 
interests of the service and of the public must be considered. Suppose another case, that 
of William Smart, who is a man of quite different calibre. Let him, like John Hart, enter 
at age 20 at a salary of £200 per annum. At age 30 let him receive substantial promotion, 
and take a salary of £500, and let us suppose that at age 40 he has done so well that he is 
again promoted to a high post, and receives a salary of £1.000. and that at age 45 he 
reaches the highest grade in the service and draws a salary of £2,000 per annum for the 
remaining 15 years of his service, and that at age 60 he retires on pension. Now, when 
the figures are worked out on the same lines as above, his pension on retiring under the 
Provident Fund pUn would be only £419 without the bonus, or roughly, with the bonus, 
about £585. and this would be quite inadequate for a man who had attained such high 
position, and the Railway Administration would be urged from many sides to come to his 
assistance with a supplementary pension, and could scarcely avoid doing so, because, after 
aU, the salary of £2,000 had not been dra%vn for a long enough period to enable William 
Smart to make sufficient savings. Yet the Administration had throughout paid 3 per cent, 
on the emoluments of aU the staff, and guaranteed a high rate of interest on the 
accumulations of the Fund, in order that each might be secure of an income Oiie^inate to 
his patiUan should he be obUged to retire. On the Superannuation Fund pUn William 
Smart's pension would be £1.333 6s. 8d. if based on terminal emoluments, or £840 if based oo 
average emoluments, and a pension of £840 is surely the smallest that such a man should 
receive. By adopting the average instead of the terminal emolumente scale, it is seen tbi4 
the most efficient officers are even treated rather shabbily as compared with the others. It 
is clear that from the point of view of the service, and it may be added of the public. 



214 



APl*ENDICES. 



I 






the Provident Fund pl.n ig unworkable. With .noh . man as WiUiam 8m«t, either the 
Railway Administration would be constrained to keep him in the servioe when perhaps hi. 
health was such as to unfit him for duty, and they would have to pay someone else to do 
hi, work; or they would be obliged to retire him on a small pension and supplement it 

of thirir r^ n ^ ™ " ^'"^ °®'*' '■" ««°P»»«™ Pe-U'y in his old age. A man 
Isilrtf" "k t ■""'". '^"*' "" *■'■""" " ""'«' "-"« "f «'«■ ""J ""t-uoh a poor 
™ an^r *""'.'''''?"" '<»™ "•« ""- - 'he early years on realising hi. Z 
powers, and the service and the public would suffer. 

br«alc?! I*«>-dent Fund plan also deals very hardly with those officers whose health 

b^ks down m onddle hfe. but that phase of the question need not be illustrated by 

figures. The supporters of the Provident Fund plan, and also those who advocate the 

h rr " the Definite Pensions class, base their arguments on the assuniption 

hat the company s contributions are to be earmarked for individual officers, and aUotted 

other course be followed. But the assumption involves a faUacy^^nd. so long as every 

adequate to the needs of h.s position in Ufe. no injustice is committed if the company's 
c^ntnbutions are pooled and applied in such way as wiU promote efficiency and comfort ii 
the service as a whole. This point cannot be more forcibly stated than in the Report of 
^WtT'Tr Tu?""'"' South African Railways, from which a quotationTy be 
rr,^K r ^ ''^'^^^ *»»»* these railways are national property, and are 
controlled by a Government Department caUed the Railway Administration !1 

.. XA '^'\ ?''° """"^ **^^ ^"^ "^^""^ °f *^° f^'tors, the interests of the 
^^ Admimsti-ation and the interests of the members of the Fund. These interests aw 

" r^ \uT u1 ""^""^^ ^^'°'^'"^- ^°' ""^^^ ^'^ Administration and members 
^^ desire hat the latter should obtain the greatest possible benefits, the Administration 
^^ must also see that the Fund is capable of fulfilling its object, and that no further 
^^ unforeseen hability wiU fall upon the Government. No solution can be satisfactory 
which, besides enabling the employer to retain able and trustworthy servante. does 
" not also protect him from appeals for compassionate allowances, and enable him to 
" get nd of employees who have become unfit to continue in service ... The 
" first essential is to gain a clear conception of the Administration's obj^t in 
" undertaking the heavy expenses which a co-operative Pension or Provident Fund 
" involves. Its purpose is to keep the whole service in an efficient state, and with 
" that am, to be free to place on the retired list those officers, high or low, who are 
- " from any cause unfit for duty, without being embarrassed by further claims upon ite 
" purse. If It 18 to do this it must be able to grant its servants on retirement 
- (whether owing to iU-health. old age. or any other cause) the pension or gratuity 
" which seems reasonable in the particular circumstances. Now it may be that 
" either scheme will fulfil these requirements, and this question wiU be the next one 
•• to be examined. But the immediate conclusion which the Commission draw is one 
" of pnnciple. The ultimate object being not to reward the thrift of individual 
" members, but to provide for the service as a whole, there is no justification for the 
•• popular view that each contributor has an inherent right personally to derive from 
•• the Administration a contribution equal to the amount which he has contributed. 
•• For reasons of tradition and convenience the Administration may agree that its ' 
" subvention to the Fund should equal the total amount contributed by the members. 
" But it intends its subvention not as a present to individuals in proportion tq their 
•• payments, but as a general reservoir, to be drawn upon for the purpose of equitably 
" meeting the varying needs of its servants which arise out of the changes and chances 
" of life." 

B. Fixed Pensions Fund,-This class of Funds operates simply by granting a deferred 
annmty of amount fixed beforehand, in consideration of certain contributions, and it may 
be arranged either that the annuity shall be entered upon at a fixed pension age. or that it 
shall be entered upon at that age or at an earlier age in the event of complete breakdown in 
health. The conditions as regards the annuity may be varied by causing the amount to 
depend to a oertam extent on duration of servioe, but the actual annuities are fixed. Wo 



EVIDENCE OF MR. G. KING (lORD SOUTHWARK's COMMITTEE). 215 

may thus, for instance, have an annuity of 10s. per week on retirement after 15 years- 
service, or 15s. per week after 25 years' service and 20s. per week after 35 years' service. 
The contributions as a rule with this class of Funds are also fixed, being at the rate of 
BO many pence per week, and in some cases where the members contribute and the 
employers do not, the contributions are returnable on death before pension, or on 
withdrawal ; while in other cases they are not returnable. Mention may be made of two 
Railway Funds, in which I have been concerned. The North Eastern Railway Servants- 
Pension Fund is an example of this class, with contributions by the members and by the 
company, the members' contributions being returnable under some circumstances with 
interest; while the Great Northern Railway Superannuation Fund. Class II.. Pension 
Division, grants pensions of this kind, the company itself paying penny per penny towards 
pension in the way of contribution, and the contributions of the member and of the 
company are paid over without interest in the event of death before pension, while the 
members' contributions only are returned in the event of withdrawal before pension, and m 
neither event is interest allowed. Two large private firms, Messrs. Rowntree of York, and 
Messrs. Heathcoat of Tiverton, have recently with my actuarial assistance inaugurated 
Pension Funds for their employees, and with their kind permission I submit to the 
Committee copies of the regulations. Both these firms have exercised exceptional 
generosity in the amount of the subventions they grant. Messrs. Rowntree's fund is 
guaranteed by their subventions, which may vary from quinquennium to quinquennium 
on the certificate of the actuary, and which in certain eventualities, and on actuanal 
certificate, may be returned to the firm. The contributions of the employee are returnable 
with 2i per cent, compound interest on withdrawal or dismissal from the service from any 
cause or on death before becoming entitled to a pension. In the case of Messrs. Heathcoat. 
the firm provided " service money " to supplement the pensions of those who were in theur 
employment when the fund was started, and in addition they contribute up to certain 
limits penny for penny of the contributions of the employees. The contributions of the 
members with 2^ per cent, compound interest are returnable on withdrawal or on death 
before attaining pensionable age. but the contributions of the firm are not returnable under 
any conditions whatever. Now and then it happens with these Fixed Pension Funds that 
the contributions are calculated as a percentage of salary, but that does not seem to me 
a good plan, as it introduces uncertainty, and will tend to produce discontent, because if 
members rise to high position they will be called upon for heavy contributions out of all 
proportiion to the fixed annuity to which they will be entitled. This class of funds seems 
to be confined, for the most part, to wage-earning employees, and it need not be discussed 

further here. 

C. DefiniU Pensions, or " Money Value," Fund.— This is a kind of Fund which has been 
strongly supported by previous witnesses who have appeared before the Committee. Under 
this plan pensions, the amount of which is known in advance, and which are therefore 
caUed " definite pensions," are secured by the contributions, and the contributions may be 
treated either as annual premiums for a deferred annuity, or as a series of single premiums 
each to purchase a paid-up deferred annuity. The pensions are usuaUy secured by con- 
tributions which are a percentage of salary, and the employer frequently contributes £ for 
£ of the members' payments. When the contributions are treated as annual premiums, a 
definite pension is set up when a member first joins the Fund for such amount as the 
deduction from his initial salary will purchase as an annual premium, assuming for the 
moment that the employer does not contribute. Thus, if «ie initial salar>' be £50 per 
annum, and the entry age be 20, and if the employee's contribution be 2J per cent., it is al 
once ascertained from a previously prepared table, possibly based upon the statistics of 
the Fund, what deferred annuity will be provided by an annual premium of £1 5s. 
commencing at age 20. Five years later the employee's salary is raised, let us say. to £75 
per annum, and the table again shows what additional defeiTed annuity will be provided by 
an annual premium of 12s. 6d; commencing at age 25. and similariy for any further 
increases or, let it be added, diminutions in salary, the diminutions merely providing a 
deferred annuity of negative amount which is deducted from the annuities previously set 
up. Thus the exact annuity already provided is known in advance, and the only uncertainty 
depends on the future increases of salary, so long as the prepared table remains applicable. 
In some cases the contributions are treated as single premiums, and those arising from 



216 



APPENDICES. 



I' * 

11 R 



defen-ed annu.ty. Tl,«re „ no difference in aotu«ial principle between the annual and the 
single premium arrangements, but in practice under the annuJ premium arrangem«,t tb. 
deferred annuities set up are larger to commence with and increaae' mote slowly, the 
increase, arising merely from increments in salary; while under the single premium 
an^ngement ««ch year shows its own small increment to the prospective pension, but 
anyone from the prepared table, can calcuUte in «lvance, always aseuming a eert«n salary 

elass o^nsion fund i. held by some to be more stable than those where pension, are 
calculated upon «darj., but that is not necessarily so. In «.y c««,, . rate of mortality ha. 
^ be assumed and involved in the prepared table, and the actual mortality may differ 

tTe wS ^2 "T"^ ""*• ^^- ""^ "" «■»?%«'!««« »ot contribute, and anle« 
th! r ! u! ■"""'*"■ «»""'"'«<>■'» «'"• compound interest at the rat. realised on 

mus "]» .".n."^ °" death or withdrawal before pension, the element of withdrawal 
TL rf f '' ' '"'""^ '" ''»'«'J''«°8 tl>« "*lc. and that is an element which 
h. 'f T r'- ""^ "'"'''■ """y ^"f« '""<''' '"■» the estimate.. Moreover, if 

LZ™ ^t"^ ""'*f:''- "' " ""'" "»■""">'"-» "«> "Ot returnable, which is the u.uj 
sUpulation. then a different prepared table must be used for the employere" contribution.. 

^it! t ," T"" ■"»'^'y«'d ^'hdrawal are much accentuated, and th. 

Definite Pensions plan becomes nearly as unstable as any other. Under the Definite 
1 en ions plan the pensions may he merely deferred annuities commencing at a fixed age. 

^^"n^hat ' iZ'" "".r T<^ '»y'">0 "•« «-«! -n-i'y «««. again the amount of the 

thtr T r T " '"°"'" *'^'""" °' >"«=«'*»i'"y- But some Fund, of this kind 

Wth »„7 r"" r"'''' " "'" °"'^' '" *"'y J"""'"" '" "■« '"'o 0' breakdown in 
health, and under such an arrangement there are the further disturbing elements of the rate 

1 trr r^' '""'^'""■' ■"' °' "■" ^ "' •^"^•^^y -ongstLy pensl^l^s « 
win. therefore be seen that the cUss of funds included under healing C may be just J 
uncertain in their operation as those classes wherein the pension, a^ calculate 1" 
«Jary. and only where the system is so rigid a. to be practicaUy unsuiteHo Z 
requirements of a general staff is there any approach to certainty. A few words must bl 
said regarding the appUcation of Class C to a reilway staff. In this respect iroLTa^ to 
a way very similar to Class A. Provident Fund, and in fact the two cla^ hlrr^'^ Z 
common. In the Provident Fund the contributions are merely accumular.^d "elwith 
in the way provided for m the rules when the event for which they are paid arise^ wh^ 

T" t K ■"'' ''*''"°'" ^'^- ""^y •" "^ ^'rtuaUy acumula J to the redTt ^ 
each member, but at the outset the annuities, etc., are determined. If the foreiro thi 
ac uaries in Class C should be exactly realised, then Classes A and C wou^d p :d~entil 
results and the results will differ in practice only in so far as the actual experienc; ^ffet 
frem be forecasts. Therefore, if we take for the Definite Pensions Fund Taml .th 
as John Hart and WiUiam Smart, they will work out very nearly a. they do t the 
case of the Provident Fund, and aU the objections from the lilway administrlLn p-^int of 
view that «ust agamst the Provident Fund also exi,,t against the Definite PenZfFund 
Formerly the Fund of the Ix.ndon and South Western R^way was of the DefiZpen!!, 
Fund class and it had to be reorganised for the reasons given above, which teU ag^nrthe 
t^er Tf^ ;, ff « ""i^""- «> «'-ly -i 'oreibly set forth by the Comm^oH 
the Central South African Kailways were found to exist and to render the Fund unwZbL 
D. Superan»,u,Uon F,.«d : Pensic. Baud on nnnM E„^i,.„^„„,_p^^^l 
h,s c ass are based upon the salary being dn.wn at or alK>ut the time of retiremerii d - 
thus the employees income after superannuation bears some direct preportion tl' t e 
mcome he wa. receiving just before he cease.1 active work. Sometime, the !LC acVui^w 
being drawn at the time of retirement is that taken for the calculation of ZlTltlj 
pension, but more generally the average salary of the b«t three, five, or seven vJI^T.h 
aesumed. The reason for taking the average over a period is tLat he Zunt Tp^l' 
may not be unduly increased by an increase in the salary made just before reUreme^T 
.ncrease of salary having been grant«l perhaps with L direct obi^^^f ^Zg Z 



EVIDENCE OF MR. G. KING (lORD SOUTHWARK's COMMITIEE). 217 

pension. Some directors are possessed of the idea that Pension Funds are wealthy 
institutions which can well Iwar such a charge, and they think that it is kind to the official 
and that they are performing a good act if they give an increase of salary which is to be 
drawn only for a short time, and which will therefore increase the working expenses only 
to an inappreciable extent, if by doing so they give greater comfort to him, who through 
long official intercourse has become, perhaps, their friend in his old age. By taking an 
average salary of even only three years, this drain on the Fund is avoided, and therefore it 
is very usual now to take such an average. In some of the departments of the Civil 
Service the pension is based on the salary actually being drawn at the moment of 
retirement, while in others a certain average is struck. The technical term "terminal 
salary " is used in this connection, whether it be the actual salary current at the moment 
of retirement or an average calculated over a few years. 

The pension may be a uniform percentage of the terminal salary for each year of 
service, or there may be an irregular scale showing what proportion of salary will be taken 
on retirement after any given number of years' service. 

The great advantage of the plan of basing pensions on terminal salaries is that it gives 
a free hand to the railway administration, and every servant, high or low, receives a pension 
directly related to his income at the time he is retired. 

Theoretically, therefore, from the point of view of the administration, this plan is the 
best, and if the actuarial estimates be based on statistics that are really applicable to the 
particular Fund it may work very well. There is, however, the drawback from the practical 
point of view that thofee officials who receive substantial promotion comparatively late in 
life take a large share of the moneys subscribed by the railway administration and leave a 
comparatively small share to those whose salaries remain constant, or nearly so, during 
their entire service. For this reason discontent is apt to arise, and the lower grade officials 
allege that they are unfairly treated. From what has already been said, these have no real 
ground for such complaint, but it is difficult to convince them of this, and therefore the 
plan of basing pensions on terminal salaries is falling into disuse. 

Also, if the actual experience should vary to any great extent from that on which the 
estimates were based, the efifects of the departure are accentuated, and especially any 
changes in the relative rates of pay of the officials of different grades may have the effect 
of causing appreciable disturbances in the finances of the Fund. 

Another objection to the terminal salary plan is that any decrease in salary in the later 
years of service has a serious effect upon the amount of pension. It not infiequently 
happens that a man may become unfit for the post that he has been occupying, but that he 
may be quite equal to some other kind of work, which, however, would involve a lower rate 
of pay ; and it may be kind to him to transfer him even at a reduction of salary but the 
employers are reluctant to take this step on account of the reduction that will thereby take 
place in the pension, and they are placed in a dilemma. This difficulty, however, can be 
easily overcome by arranging that the contributions to the Fund shall continue at the old 
rate and that the pension shall be calculated on the salary enjoyed previous to the 
reduction. The employers might even be willing themselves to pay the difference in the 
contributions between the old rate and the new, because thereby the actual reduction in 
salary would be only a trifle less than the nominal reduction, and the Fund would not be 
prejudiced in any way. 

It is found that, up to a certain point, with increasing age at entry tlie percentage of 
contribution on salary necessary to secure pensions of this kind increases. In former 
days effect was not given to this consideration, and in respect of all entrants the 
contributions were taken as a uniform percentage of salary. That aiTangement, however, 
was found to work inequitably, and it is usual now to have a scale of contnbutious 
calculated as a percentage of salary, that percentage increasing as the age at entrj 
advances. After a certain point the necessity for still further increasing the percentage 
of contribution ceases, and it is quite safe to admit all of, say, 45 and over at the 
same percentage. 

In preparing the scheme for the Central South African Railways a different method 
was followed. Ther« it was found convenient to have a uniform percentage of contribution 
for all entrants, and, therefore, instead of having an increased percentage of contribution, 
there has been adopted a decreasing percentage of pension. For instance, for officers aged 



218 



APFENDKES. 



An officer how.v.7T T ^"^ '*°'- """^ " »8* ^^ »"^ <>«■• If® I»' <=">'• 

Z . h,!ir T . °""^' '^°"°° """ """ P'-" P"^""" »>"> »»y "« prepared to 

DlanB^fT""""""'"? '"""''■■ 'P'""<™*<"«'°« ^"-"y* iW«««,/,._I„ pr«,tice this 
tWe™«e ,^ o,, sa, .He >.. seven yZZfjL'H Z'Zl^Z^ ^ 

worse under the average saZ ^IT^ ' !L 'Tu """"^ "''° '"* W^^^y 

^s ;:: aver':? ^ ^'l ""'u'"' ''""'"'' "'^'^ P'*" «" ?"'«-'• yo' -^ t^^d 
was the average s^ plan which was «Jopted. Under the average «Uary nlan the 

.rrzrtt iii^iSrr r "^^ ■"""" "■- '"•"^ '^^-^■^- 

~*.Kii.K J^ ~, ""''""">'"■ »"<1. therefore, more particularly when a fund is beine 
established under cond t ons which am to » »■««> ... . i J »" • '"nu is oemg 

is the safer. are to a great extent unknown, the average salary plan 

Here also contributions have to be graduated according to age at entry the higher 

^z::;:^.^'' "-^^^^ ^ -'«- « «>' ^ - ^^^^^ 

riJnT^' '7'""; "'"■ "" •""«* «Jai7 plan be conveniently arranged, just as in 
J^^ '^ »■"■""" ">e percentage of contribution, uniform for aU ages at ™ r,„d to 
pve educed percentages of pension as the age at entry inc«ases ; a^r t^ enabfe office™ 
to secure sufticient provision for thnir nW »«« ;* ^ i l enaoie omcers 

according to duration of mAmhArsliir^ tu^ ^ i , ** pension vanes 

ages at entrv ^aZrlr'^' " "''* "' percentages being applicable to all 

efZL .7 \ """"'"^ '" "■* ^■»'"''«°°» i' " necessary to treat the 

entiants at each age separately, but even then troublesome and lengthy calcXion! 

havrr,! r. ."L"" J*"^ """"" "°™ "'"'P'"- •""O"*'' "•« <!«««■" e»try agrl^d 

"r: t,rxr j^yririttrr '- '^-^'^-^.r ""'^-^ '-"' 

work very weU. ""'»»>»• »"<» I bope that expenence wiU show that it wiU 

There have been agitations in this country to introduce into «,me of the raUwav 
superannuation funds a rule under which officers with large salaries should p4 aether 
percentage of contribution than the others. For instance, if a man were to entor at aTf OQ 
at a commencing salary of «50 per annum, and if at age 30 he were to be p«,moted a^ h"i! 
salarj-were to be increased to £500. the proposal is that, as f™m age 30 the ~.^„t«e 
charged on h,s salary should be greater, and ,o on for other increas^of sal^ ^7m,tr 

Ithmk thatthe agitation arises altogether f,„m the misconception, which have .^Cv 
b^n diseased. 1, the contributions of the company be pooled, Ld applied for The be^t 
of the service as a whole, there is no rea«,n why the higher ^daries should be sm^hZ^ 

^rdmg to his onginal age at entry. To introduce the system of ..roharge w^ ca^ 
.gr«a oomphcation m the actuarial arrangements, and so far I have not been ablet deZ 
any method by which the actuarial valuation, could be effectod. This T^^ 



EVIDENCE OF MR. G. KING (lORD SOUTHWARK's COMMITTEE). 219 

objection, because it is very impoi-tant that superannuation funds should be kept under 
strict actuarial supeiTision. 

4453. During this inquiry the fallibility of actuaries has been referred to, and perhaps 
you would like to say a few words upon that point. One witness quoted a statement as 
follows: — " We have had experience in several instances in recent years of the liability of 
actuaries in common with the rest of us to error, and that does not encourage us as regards 
the future to repose implicit faith in their prophetic valuations. I confess that I do not 
see for myself how complete solvency, as demanded by the actuaries under their system of 
valuation, can ever afford to contributing members that peace and security, coupled with 
fulequate prospective pensions, which I desii-e, except at a cost to the companies so 
excessive that they will shrink from undertaking such a burden." The name of the witness 
was Mr. Walkden, and I asked him where the report appeared ; he said it was a report of 
a speech by Lord Claud Hamilton on actuaries. I said that no doubt the actuaries would 
want to say sotaoething upon that. I believe you would like to say something in connection 
with that criticism ? — Frankly, I agree that actuaries cannot possibly predict tlie future 
with strict accuracy. There are very many variable elements that have to be taken into 
account, and there must, therefore, be elasticity to keep the Fund solvent, and frequent 
actui^rial valuations, so that any changes that take place may be dealt with in time in order 
that there may be no necessity for very violent measures to put matters right. A very 
strikhig example, however, can be brouglit forward to show how even the most cautious 
forecasts of actuaries may fail to give stability and certainty to a Fund, and that where 
even extreme rigidity is instituted at the outset tiiere may be fluctuations in the working 
of such a Fund. Here I would put in the valuation report of the Elementary School 
Teachers' Deferred Annuity Fund. {Handing in sanie.)'^' That Fund was established under 
the Elementary School Teachers' Superannuation Act, 1898, for tlie benefit of the teachers- 
male and female — in the elementary schools in England and Scotland. Each male teacher is 
under compulsion to contribute £3 each year to the Fund, the female teachers contributing 
less. The figures may be altered from time to time by special orders, according to the salaries 
being paid to the teachers in the aggregate; still, they are always a fixed and certain 
amount when they have been settled. These contributions are treated as single premiums 
to purchase deferred annuities to commence at exact age 65, and the contributions are not 
returnable under any circumstances, the annuities remaining to the credit of the teachers, 
even if they witlidraw from the service. Thus it appears that the only uncertain elements 
in these Funds are those of mortality and interest. A table of deferred annuities was 
prepared under the Act jointly by the late Mr. A. J. Finlaison and the late Mr. W. Sutton, 
both Government actuaries, and they based their calculations on the Goveniment 
Annuitants, 1883, experience, at a mte of interest which is not known, but which was 
very low, being less than 2^ per cent. The table shows at each age what deferred 
annuity commencing at age 65 will be purchased for these single payments, and a copy is 
npw submitted. It would have been thought that the basis adopted by these eminent 
actuaries was a thoroughly safe one, and in fact there had been agitation among the 
teachers, who alleged that the annuities secured were too small, and that the Fund could 
afford more; that the i-ateof mortaUty amongst teachers was higher than tliat amongst the 
Government annuitants, and that, therefore, it was not fair to employ that table for the 
teachers. The Treasury did me the honour to entrust to me the first septennial valuation ; 
the I'ate of mortality which had prevailed was investigated, and it was found that that 
rate was so low that the calculations of the actuaries were altogether stultified, and that 
there was a large deficiency in each of the Funds — that for the males aud that for the 
females. It thus appears that even in the case of a Fund so carefully pi-epared, and 
established on what at the outset had every appearance of excessive safety, there may be 
great surprises, and that the best knowledge and skill may fail to forecast the future. 

* This report was publish^ as House of Commons Paper No. 11 of 1906. 



220 



I' ■; 



r I 



. i ! 



API'EKDICES. 



APPENDIX VII. 



EXTEACTS FROM SPEECH BY MR. CARSON ROBERTS AT THE INSTITUTE 
™'eT^' ^^ ™^ METROPOLITAN BOROUGH SUpIranNU^^^^^^^ 

(29th April, 1912.) 

In thffi ^T'' ^T"^ '*^^ '^"' P"""^*^'* legisMon presented a series •£ four phas«i 
In the fi«t phase the I^al Authorities were without statutory power to grant ^ons^t 
^jna those who voted pensions, even in .ost deserving Z., .J^, Z Jit 

In the second phase they had voluntary powers-the system beinc stUl nn„ 
contributory and of course upon an " assessment " had- a « a . ^ 

in the Metropolitan Act of 1^ tk .!• ^ ^"^ *"°^P^® ^" *^ ^ '*>"°^ 

The combination of the contributory with f h« ! '^® municipalities. 

cui^ these ,u^ J eoot^ io^weJ^rc:::^ rr-c:^"^:;'':' ""^-' 

»pon other pu,po«s. such as relief of the poor a^ moX" of "soTatT' 

reductK,n of rates-a proof, if proof wer» needed, that the "»J,^en7"Zt *^^°^, 
the correct principle to follow in the case of any pension fnnd ' "" ■"" 

capitali Jon /as «f interltr/:! ^.^ r^i; ifa^^^rutrlh^^^ Thf 
paper which they had heard that day was concerned. "''"*"• 

He claimed that the Stepney and Bethnal Green Acts marled the flrat .ff„.4 . 
.nshtutrng accnmulating fands. and that they honestly aimed ^T^, r . f "' 

assessment. To his mind Section is „# f """""y »«"ed at capitaluation and not at 

landmark in this l^sT Uo'n ^U sLtioI r^ ■t,°"°**°'' ^°* "' '"^ '" "" ««' 

periods anda .rtificl Tfix ^ ::::VZ:^Hb:tiri:'^h'"^""«-"°° ''""<^ 
•• shall he solvent." He had no intentir^ ""ntabution in such mwiner that the fund 

these words "shaU b^ theni 'TTJ T^."'' ^ T'''"^"'' °'''' ''^ '^'''■'•^ ^l 
concerned. In two of the s^v „ JLZ T^t T '^' •^'"°" ""'' ""y "»» 

re^ui. continuous ^^^^^r..:Ze'^^'t:':::z:^:':^^^ •-- r- •- 

income should meet the outgo for the succeeding five yel '^'"" ""' "" 

conveyed that meaning or not Thev h,^l \h. • . whether the words definitely 



Mn. CARSON ROBERTS ON THE METROPOLITAN ROROU«n SCTIEMFi5. 221 

the paper, that they did. Fortunately, they now knew that Parliament would take care m 
future to make its meaning clear by adopting the Kensington clause in the form to which 
it had been amplified by the Institute of Actuaries— a form under which the great principle 
of capitalization was established beyond any doubt. He thought the real credit for this 
good work was due to the gentleman who insisted upon the original introduction of the 

Actuarial Clause. 

As to the clause which required the rate contribution in respect of all pension costs to 
be made " As nearly as may be an even annual charge," he was afraid that only one 
interpretation was admissible, viz., that the initial deficiency, together with the remaining 
pensions under the old voluntary system, were to be spread out as a perpetual rent charge. 
In the paper strong reasons were given for holding this to be inequitable. It was urged 
that the initial deficiency should be discharged by a sinking fund of limited duration, and 
60 years was shown to be the most reasonable period. He agreed absolutely that these 
arguments were financially sound and that 60 years was a very right and proper selection. 

It gave him great pleasure to find Mr. Ackland and himself in reversed positions in 
regard to this question of what is the sound financial principle for a municipal pension 
fund. Mr. Ackland was now out-Heroding Herod in his condemnation of the 
" Assessment " principle and in pointing out the inequity of allowing any part of the 
initial deficiency to remain as a charge on future generations. He entirely agreed with 
Mr. Ackland and Mr. Manly ; let them by all means have a 60-year discharge definitely 
prescribed in the next Act if they could. Then they would have reached perfection in the 
financial basis of this pension legislation. 

The President asked whether Mr. Roberts could state the name of the gentleman to 
whom credit was due for the introduction of the actuarial idea. 

Mr. Cabson Roberts said there was no objection to stating it. He took it to have 
been introduced by the late Chairman of the Local Legislation Committee, Mr. CornwalL — 
(Journal of the Institute of Actuaries, Vol. XLVI, p. 377.) 



ADDENDUM. 

The Chairman of the Sub-Committee having informed Mr. Carson Roberts of their 

views on the subject of past service {see pars. 177, 193 and 334) i-eceived from him the 

following expression of opinion : — 

" 2lst April, 1917. 

" I quite agree that it would have saved much confusion if the liabilities and privil^es 

" connected with ' back service ' had been kept distinct from the general schemes in all 

" Pension legislation. All this legislation (and likewise National Insurance legislation) has 

" been overburdened and handicapped by too great eagerness to give full participation to 

" those whose period of contribution is much below the full. It would have been ^r 

" better to have dealt with the part contributors in a set of transitory provisions and to 

" have allowed the full contributore the proper benefits warranted by their contributions, 

" plus the normal subsidies. Then the special subsidies granted to the members who were 

" older at the inception of the Scheme would have stood out and would have formed in 

" themselves a complete answer to any grumblings during the transitory period. As it is, 

•• all the schemes give too much to help this transitory group, and, what is more, the 

•• beneficiaries are quite unaware of how great a part of the subsidy is diverted to them." 



if 



222 



APPENDICES. 



MR. tinner's scheme. 



223 



APPENDIX VTIT. 



! I 



Suggested by Mh. T. Tinner, F.I. A. 

pensions purchased hv f i „f * u . ' ^ Po'^We »» arrange a scale of 

being paid Whenever IL T^fT"' P»"' «' -^"-V ■««. the pension thus purchased 

or his sa,a,v. the tahfe wo' uraJ^Vs SC"" '"""""^ "' ''' ""« "' " ^' «- 

pension. sryfX. the s^^LT" T T" "' '^^ ''' *'"' "<""" P"""'- » "'^- 
and each succ^'i„' w, '' Ik T "' ■*" ''' ^""^ P°«''«" » P*"""" <>'. "T «?! 
manner acZ^rji; """"•'""T, ''•-''' P^-de a pension, calculated in the san.^ 

for the return of contributions in ^se of de'ath or 1:^11^^ ^ "" **""">' '" ^""'""'<' 

actuarial table requir^ and "^u ,/ k ^" ^^P"^' '^"'' '»"* « "-^ ""'y 

arithmetic can ^^wl Z . *" ' /"? ""^ P*'^'' "'"■ "» «'«'"™"^ '"'"''Wge of 

anal or aver:;^:';^ ICmlTifr .TowT^t ^ ^ " * ^'T •'^"•~"'°- °' 
The table shows for each year of age fromM to rT I . ^ ^*" ''^ y'*' "'" ^■ 

contribution of f 1 paid at Zt LTt ^'^""' "'"' ^ ?""">"«> '^"' • 

permanent i-pacftlr^'tlrcu^LrrdrfTth^^^^^^^ Z '' "" '^'^ 

Of the employee-s owT^riCrr ^L^hTtt ^^r^^ ' '"°'^"'' '" '^^ "'"» 



the experience of the body for whose benefit a fund is to be started because the 
establishment of a pension scheme tends to alter the rates of retirement and mortality'. 
The basic table should be derived from the most suitable experience available and revised 
from time to time to accord with the results of successive investigations. 

To illustrate the application of Table III and to show how the rates of contribution 
required can be determined, hypothetical cases have been taken of officers receiving salarj' 
according to Scale A and Scale B respectively of Table II, and the detailed figures in 
Columns 3 to 5 and 6 to 8 show the pension purchasable with 1 per cent, of salary, and 
how it is gradually increase<l year by year, as the successive contributions of 1 per cent, of 
salary are received and applied. Thus Column 4 shows that a contribution of 1 per cent, 
paid between ages 20 and 21 in respect of an officer assumed to enter at age 20, and receive 
salary according to Scale A would purchase a pension of 58. 4d. a contribution at the same 
rate paid between 21 and 22 would purchase a pension of 5s. 8d., and so on ; while 
Column 5 shows against eswh age the total of the pensions purchased by the contributions 
paid at that and younger ages. If, therefore, the officer retired at the end of 10 years, the 
pension purchased with his 1 per cent, contributions would be £3 4s. lOd. ; after 20 years, 
£7 3s. 4d. ; after 30 years, £11 2s. : after 40 years, £14 7s. 4d. ; and at age 65, i.e., after 
45 years, £15 14s. 2d. Assuming it were desired to provide him with a pension equal to 
two-thirds of his final salary of £240 per annum on retirement at age 65, it will be seen 
that the amount of the pension would be £160 per annum ; and as 1 per cent, of salary 
would purchase a pension of £15 14s. 2d., the contribution required for a pension of £160 
would be very slightly over 10 per cent., which rate would provide £157 Is. 8d. at that age. 
In Table IV are given other illustrations of officers entering at ages 25, 30, 35, 40, 45 
and 50 and receiving salary under Scale A, commencing at the rates appropriate to their 
ages on joining. Table V gives similar illustrations based on Scale B. The following 
table shews the approximate rates required to provide a pension of one-sixtieth of final and 
average salary at age 65 with a maximum of 40 sixtieths : — 



• 


Approximate percentage required if Pension is based on: — 


Age at entrj. 


Average Salary. 


Final Salary. 




Scale A. 


Scale B. 

1 


I 

ScAle A. 


Scale B. 


20 


8 


8 


10 

1 


11 


25 


9 


9 


u 


12 


80 


9| 


n 


11 


12 


85 


10 


10 


11 


12 


40 


11 


11 


12 


12 


45 


12 


12 


12 


12 


50 


m 


12* 


m 


m 



Tlie object in giving the percentage of salary required according to Scale A and Scale B 
respectively is to show that although, as is well known, the greater the rate of increase in 
salary the higher the rate of contribution required, yet even with two scales of salary 
differing as widely as A and B, the differences in the rates are so small as to shew that 
there can be no practical objection to adopting a uniform scale of contribution for all officers 
joining the fund at the same age. 

It is interesting to observe that these rates of contribution, while providing 
approximately for pensions calculated on the sixtieth basis on retirement at age 65, will 
purchase, on retirement through ill-health at younger ages, a pension in excess of what 
would be allowed if calculated strictly at the rate of one-sixtieth for each year of service 
This is illustrated by the following table based on Scale A : — 



i 



i ! 




l\ 



224 



APPENDICES. 



Percentage of Final or Average Salary on Retirement 

after:— 



On sixtieth basis 



10 I 15 i ao 25 80 

y«M». [ yean, years, years, years. 



16-7 I 25 33 3 , 41-7 ; 50 



86 

years. 



28-4 



359 



29-4 i 40-6 



28-3 360 
284 388 



41-2 I 44-9 



49 55 5 I 60 4 



47-4 



41-5 



On money purchase basis. 
Entiy age 20: — 
Percentage calculated on Final 

Salary (Contribution 10 per 

cent.) 

Percentage calculated on 
Average Salary (Contribution 

8 per cent.) 

Entry age 25 : — 

Percentage calculated on Final 
Salary (Contribution 11 per 
cent.) 

Percentage calculated on 
Average Salary (Contribution 

9 per cent.) j 

Entry age 35: — | 

Percentage calculated on Final 
Salary (Contribution 11 per | 

J*"') 21-6 27-8 35-3 421 ' 483 

Percentage calculated on ' o oo (j 4 ^ i ^ 48 3 

Average Salary (Contribution | 

10 per cent.) 225 310 377 436 488 



58-3 



40 

yean. 



46 

yean. 



66-7 66-7 



45-2 



471 53-5 



52-3 
58-6 



53-6 
64-3 



59-9 65-5 
67-6 ' 70 6 



591 
631 



65-2 — 
671 — 



Simdar results would be obtained for other ages at entry and it is worthy of note that 
the advantage mentioned obtains in greater degree where the officer enters young and h^ 
not had the same opportunity of making provision for himself as the officer entering later 

The fact that the pensions allowed on early retirement are greater than those which 
would be given if they were calculated at the rate of one-sixtieth for every year of service 
will m all probability not be accounted a disadvantage, because in those cases the pension 
on the latter basis often seems absurdly small regarded as the means of subsistence of a 
man who is permanently broken down. For instance, assume the entrant at age 20 to 
break down at. say. age 35 and to have received salary according to Scale A He wiU 
have served 15 years and a pension-rrf 1^-sixtieths of his final salary would be £36 while 
the pension purchased with a 10 per cent, contribution would be £51 Hs 2d • the latter 
amount cannot be considered excessive in itself and only appears large in comparison with 
the £36. Similariy. the pension if calculated on the average salary for the 15 years would 
be £25 10s. Od.. whereas the pension on the corresponding money-purchase basis 
(contribution 8 per cent.) would be £41 7s. 4d. As another example take the case of the 
entrant at age 30 (under Scale A) in which the comparison is as follows:— 



Pession. 



Retirement at the 
end of : — 



I 



Sixtieths of 
Final Salary. 



10 years 
20 years 
80 years 
85 years 



£ s. d. 

29 

78 

120 

140 



IMoney-purchase 

bobis 

(Contribution 

11 per cent.) 



£ s. d. 

43 3 6 

86 8 10 

122 7 6 

137 2 8 



Sixtieths of 
Average Salar}-, 



£ S. d. 

24 10 

59 

99 

119 



Money-pu rchane 

basia 

(Cdntribution 

9} per cent.) 



£ 8. d. 

37 5 9 

74 13 1 

105 13 9 

118 8 8 



*K / .^^ ?r *° """"^"P^y examples. The figures already given suffice to establish 

the fa<5t that the money purchase basis will provide a reasonable pension, whatever the age 
at retirement, and that it will afford a mon, liberal aUowance in" cases of early reti„,ment 
than the more usual basis of one-sixtieth of salary for each year of service, whether the 
pension be calculated on the average or the final salary. 

As stated above, the basic table adopted at first must be of a more or less tentative 
character and would have to be revised from time to. time in the light of experience. There 



MR. TINNER S SCHEME. 



225 



would be a periodical actuarial investigation and valuation which would test the suitability 
of the table and determine whether the pensions already purchased should stand or be 
increased or diminished. If they were to stand, well and good. If the valuation disclosed 
a surplus, so much of the surplus as it might be thought advisable to distribute could be 
allotted by way of a percentage addition to 4he pensions already purchased. If on the 
other hand there were a deficiency this could be extinguished by a proportionate reduction 
of the pensions purchased. • There would be no difficulty whatever in substituting a new 
table if necessary to do so for ascertaining the pensions to be purchased in the future. As 
it would be extremely undesirable for the benefits promised to be reduced, prudent finance 
should be the keynote of the scheme and the benefits shown by the table should be lower 
than those which calculation might show to be possible. If the contributions were at a 
fairly high rate, sufficiently so to ensure a fair pension, there is no reason why the benefits 
should be guaranteed and indeed it would tend to ensure sound administration if it were 
made clear that the fund would receive no contributions from the Hospitals beyond the 
agreed percentages of salaries. In such a scheme as that now described, it is clear that in 
the long run the benefits must depend on the income of the pension fund, and. if the 
income be adequate, the pensions also will be adequate even if those shewn by the table to 
be purchasable are lower than those which the fund could afford to give. In such a case 
there would l)e substantial surpluses disclosed at successive valuations which surpluses 
could be applied to augment the benefits purchased. 

The object of the foregoing remarks is to show that a satisfactory pension scheme on 
the money purchase basis is practicable, but the figures given by way of illustration are 
only used to show the nature of the scheme, and are not put forward with the idea that the 
tables on which they are based are necessarily the best for adoption in connection with a 
scheme for the superannuation of Hospital officers. 

The greatest difficulty in connection with the inauguration of a pension fund consists 
in making provision for the existing staff. It is clearly impracticable to provide by means 
of such a fund for those who are round about the retiring age, and special arrangements 
must be devised for their benefit and for the benefit of those who have but a few years 
more to serve. Many different plans can be suggested, but all involve considerable 
expenditure. One plan is as follows : Let all officers whose age is 55 or more contribute to 
the fund until they reach 65. when the very modest pensions purchased can be supplemented 
by allowances to be made under the same conditions as at present. Those under 
55 might be allowed to contribute at the rate according to age on joining the fund and to 
pay an additional contribution sufficient to bring the pension purchased up to the amount 
they would have received if they had commenced to contribute, say. 10 years earlier, or at 
the date of entry into the service if that be later. If this were done no officers under 55 at 
joining would receive less than the pension purchasable with 20 years ordinary contributions 
if he remained in the service until 65. and his pension could be supplemented if necessary 
by a supplemental pension provided as hitherto. The effect of such a course would be 
to leave the pensions of the next few years to be paid out of hospital funds except 
for the comparative small allowances from the pension fund. As time went on, 
however, the pensions from the pensions fund would grow and the supplemental 
pensions diminish until at length the necessity for the latter would disappear. This plan 
would entail a considerable increase in the normal cost of the fund in its early 
years as it is assumed that the Hospitals would share the extra contributions ; but the 
excess expenditure would diminish year by year as the existing officers pass out of the 
service and are replaced by others who would contribute throughout the whole period of 
service and would look to the pension fund alone for their superannuation. The extr» 
cost to the Hospitals of this plan would vary according to the ages of the officers at the 
commencement of the scheme. Another and simpler plan would be for the contributions 
to be at rates sufficient to provide the pension which the officers would have received from 
the Fund if they had commenced to contribute ten years earlier at the normal rates for 
their then ages, or, if they entered within ten years, at the rates appropriate to their 
ages at entry, with the proviso that no officer should contribute more than 10 per cent, of 
his salary, the pension so purchased to be supplemented out of the income of the Hospitals 
in the manner above suggested. 



l| 



226 



APPENDICES. 



I 



s 




-*a 




s 




o 




jS 




Q£ 




9 




O 




a 




J4 




1 


s 






eS 


t 




9 


(M 


CO 


«4* 


0) 


tic 
a 




> 


a 




•»^ 


O 




S 


p2 


c 


^ 


d 




a 


-a 


e3 


§ 


•m 


n3 


O 


%i 


o 


O 


si 


a 


o 


o 








-w 


o 

^ 


c3 

a 



u 




MR. TINNERS SCHEME. 



227 



Tablrr II to V. — Pensions based on Salary rising in accordance with 

hypotlietical Salary Scales. 



Table II. — Hypothetical Salary Scales. 



41 

48 
44 
4S 

46 
47 



fiO 
5i 



54 
55 

56 
57 



60 
61 



114 

120 

126 

132 

138 

144 

150 

156 

162 

168 

174 

180 

186 

192 

198 

204 

210 

216 

222 

228 

234 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 

240 



1 


a 


8 




Age last 








Birthday. 


Scale A. 


Scalk B. 






£ 


£ 




20 


60 


60 


t 


21 


66 


74 




22 


72 


88 




22 


78 


102 




21 


84 


116 




25 


90 


130 




25 


96 


144 




27 


102 
mo 


158 

1»7rt 


. 



186 

200 

214 

228 

242 

256 

270 

284 

298 

312 

326 

340 

354 

368 

382 

396 

410 

424 

438 

452 

466 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 

480 



P2 



MR. TINNER S SCHEME. 



229 



228 



APPENDICES. 




.0 j..r iX-tr:.^.^; -r"^- --» 



Age last 
Birthday. 



Pension (pay. 
able at age 65 
or earlier 
retirement 
through 
I incapacitation) 
[purchased with 
contribution 
of^l. 



Pension (payable 

at age 65 or earlier 

retirement through 

incapacitation) 

purchased with 

contribution of 1% 

of salary according 

to Salary Scale A. 



6 



Total pension 
purchased 

from age 30 
(Scale A). 



Pension (payable at 

age 65 or earlier 
retirement through 

incapacitation) 

purchased with con- 

tribution of 1% of 

salary according to 

Salary Scale B. 



8 



Total pension 
purchased 

from age 20 
(Scale B). 



iJ 8. d." 


5 4 


11 8 


18 11 


17 


1 16 11 


2 6 7 


2 15 11 


3 6 11 


3 18 5 


4 10 6 



6 3 
5 16 




9 
3 

7 17 

8 11 

9 5 
10 

10 16 

11 10 

12 5 

13 

13 15 11 

14 11 3 

15 6 7 

16 1 11 

16 17 3 

17 12 7 

18 7 10 

19 3 

19 18 2 

20 12 10 

21 7 

22 

22 14 

23 6 

23 19 

24 10 11 

25 2 5 

25 13 

26 5 

26 16 

27 7 

27 17 

28 7 







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Ill 



230 



AM>ENDICES. 




1 1 

! 




MR. TINNERS SCHEME. 



231 



NOTE ON PENSIONS PAYABLE AT 60 INSTEAD OF 65. 

In order to facilitate comparison of this scheme with an insurance policy scheme such as that of 
the Federated System of Superannuation for Universities, the figures in Table VI liave been prepared 
at Mr. Whittall's request. For this purpose the contributions are assumed to be those which 
would be made under the scheme of the Federated System, i.e., the contribution commences at exactly 
10 per cent, of the salary and emoluments but does not increase until the salary increases to £'20 or 
more in excess of the commencing salary, when a further policy is taken out, and similarly when 
subsequent advances have amounted to £20 or more. Thus, with contributions calculated according 
to the plan of the Federated System scheme, there may be, at any time, a part of the salary (no4 
exceeding £20) in respect of which no contribution is made and which, therefore, does not count lor 
pension, whereas under my scheme the whole of the salary is taken into account for both contribution 
and pension. The progression of salary is assumed to be that of the Hospital type cases used f<Mr 
illustrative purposes in the Committee's report, taking 60 as the normal age for retirement. The 
calculations are approximately correct to the nearest shilling, as it was felt that this degree of acciuraey 
was sufficient for the purpose in view. 

Table VI. — Pensions payable on incapacitation or superannuation at age 60, purchased with 
contributions of 10% of salary in Type Cases Nos. I, II and III (set out in Appendix X) 
modified as regards the amount of contributions so as to coincide with those under the 
Federated Superannuation System for Universities. 



1 


a 


s 


4 


6 


! 


6 


7 


8 


9 


10 


u 




Pension 
(payable at 

age 60 
or earlier 
retirement 
through in- 
capacitation) 
purchased 
with 
contribution 
of £1. 


Type Case No 


. 1. 




Type Case No. 


[I. 


Ttfe Cass No. III. 


AoB 

L.ABT 

BlBTH- 

DAT. 


10^ of 

salary 

and 

additional 

einolo- 

ments.* 


Pension 
(payable at 

a!,'e 60 

or earlier 

retirempnt 

throush in- 

caimcitation) 

purchased 

with 

contribution 

of lOJir of 

salary. 


• 

Total 

Pension 

purchased 

from age 23. 


1 

lOf of 
salary 
and 
aJditional 
emolu- 
ments. * 


Pension 
(payable at 

age 60 
or oarlier 
retirement 
tliroiiRli in- 
capacitation) 
purchased 
with 
contribution 
of 10 '« of 
salary. 


Total 

Pension 

purchased 

from age 

19. 


10 ir of 

salary 
and 
additional 
emolu- 
ments. * 


Pension 
(payable at 

age 60 

or earlier 

retirement 

thn>U'-:h in- 

cai>aciiation) 

purchased 

with 

contribution 

of lOl of 

salary. 


Total 

IVDSiOB 

pmrehiied 
tnmmf 




£ 


£ s. 


£ s. 


£ 


s. 


£ 8. 


£ 8. 


£ 8. 


£ s. 


£ 8. 


£ S. 


28 


•317 


12 10 


3 19 


3 


19 


12 10 


3 19 


17 2 


10 10 


3 7 


3 7 


24 


•305 


12 10 


3 16 


7 


15 


12 10 


3 16 


20 18 


10 10 


3 4 


6 11 


25 


•295 


14 10 


4 6 


12 


1 


12 10 


3 14 


24 12 


10 10 


3 2 


9 13 


26 


•286 


14 10 


4 3 


16 


4 


15 10 


4 9 


29 1 


10 10 


3 


12 13 


27 


•276 


16 10 


4 11 


20 


35 


15 10 


4 6 


33 7 


13 10 


3 14 


16 7 


2B 


•267 


16 10 


4 8 


25 


3 


15 10 


4 2 


37 9 


13 10 


3 12 


19 19 


20 


•257 


20 


5 3 


30 


6 


17 10 


4 10 


41 19 


13 10 


3 10 


23 9 


20 


•249 


25 


6 5 


36 


11 


17 10 


4 8 


46 7 


15 10 


3 17 


27 6 


SI 


•241 


25 


6 


42 


11 


17 10 


4 4 


50 11 


15 10 


3 15 


31 1 


82 


•232 


30 


6 19 


49 


10 


17 10 


4 1 


54 12 


17 10 


4 1 


35 2 


88 


-224 


30 


6 15 


56 


5 


17 10 


3 18 


58 10 


17 10 


3 18 


39 


84 


•216 


35 


7 11 


63 


16 


19 10 


4 4 


62 14 


19 10 


4 4 


43 4 


85 


•209 


35 


7 6 


71 


2 


19 10 


4 2 


66 16 


19 10 


4 2 


47 6 


86 


•202 


42 10 


8 12 


79 


14 


21 10 


4 7 


71 3 


21 10 


4 7 


51 13 


87 


•195 


42 10 


8 6 


88 





21 10 


4 4 


75 7 


21 10 


4 4 


55 17 


88 


•188 


47 10 


8 19 


96 


19 


21 10 


4 1 


79 8 


23 10 


4 8 


60 5 


80 


•181 


47 10 


8 12 


105 


11 


21 10. 


3 18 


83 6 


23 10 


4 5 


64 10 


40 


•175 


52 10 


9 3 


114 


14 


21 10 


3 15 


87 1 


25 10 


4 9 


68 19 


41 


•169 


52 10 


8 18 


123 


12 


27 10 


4 13 


91 14 


25 10 


4 6 


73 5 


42 


•163 


52 10 


8 11 


132 


3 


27 10 


4 10 


96 4 


27 10 


4 10 


77 15 


48 


•157 


52 10 


8 5 


140 


8 


27 10 


4 6 


100 10 


27 10 


4 6 


82 1 


44 


•161 


52 10 


7 18 


148 


6 


32 10 


4 18 


105 8 


27 10 


4 3 


86 4 


45 


•146 


62 10 


9 3 


157 


9 


32 10 


4 15 


110 3 


27 10 


4 1 


90 5 


40 


•141 


62 10 


8 16 


166 


5 


32 10 


4 12 


114 15 


27 10 


3 17 


94 2 


47 


•136 


62 10 


8 10 


174 


15 


37 10 


5 2 


119 17 


27 10 


3 15 


97 17 


48 


•131 


62 10 


8 4 


182 


19 


37 10 


4 18 


124 15 


27 10 


3 12 


101 9 


40 


•126 


62 10 


7 18 


190 


17 


37 10 


4 14 


129 9 


32 10 


4 2 


105 11 


50 


•122 


62 10 


7 12 


198 


9 


37 10 


4 12 


134 1 


32 10 


4 


109 11 


51 


•118 


62 10 


7 8 


205 


17 


37 10 


4 9 


138 10 


32 10 


3 16 


113 7 


58 


•113 


62 10 


7 1 


212 


18 


42 10 


4 16 


143 6 


32 10 


3 14 


117 1 


58 


•109 


62 10 


6 16 


219 


14 


42 10 


4 12 


147 18 


32 10 


3 11 


120 12 


54 


•106 


62 10 


6 11 


226 


5 


42 10 


4 9 


152 7 


32 10 


3 8 


124 


55 


•101 


62 10 


6 7 


232 


12 


42 10 


4 6 


156 13 


32 10 


3 5 


127 5 


56 


•097 


62 10 


6 1 


238 


13 


42 10 


4 3 


160 16 


32 10 


3 3 


130 8 


57 


•093 


62 10 


5 16 


244 


9 


42 10 


3 19 


164 15 


32 10 


3 1 


133 9 


56 


•089 


62 10 


5 11 


250 





42 10 


3 15 


168 10 


32 10 


2 18 


136 7 






I 



* See Prefatory uote. 



232 



.'lill 




APPENDICES. 



The Cost of Pefisions for an Existing Stafi 

to the existing staff, of the flZitlls In 1 T""" ""'"^ ""'• °' 'PP'^'"" ""^ "hem, 
■nethod of arriving at such an J^l . . u "^ "' " '*°"" °' "•« »»«»». "•«> best 

type cases and cldate 1 "rs '"f mvTh' "* '"'*'' "'" '^"•""■"«'» -» Hospital 
done, assuming that the eristinrstoffrw M " ^*" Particular cases. This I L. 
laws of my own Table as Cl the!r T ^ .'"'' ' "^^ ""'»-">« the statistical 
(A) mortality in service, (b) su»"ir"f , T '"?'"'"°° ""'' ""'^ """™ ~tes of 
made the calculations for ^LT mlr' "^ ""taUty after superannuation. I have 

weU as at age 65, as pro^sS " ^ oT ThL: "C tT '" ""t ""'™""«"' «^"«- " 
the cost may be regarded as a funcL ofThe ZtrihT Tf ' " """^ ^^^ """ 
Pension age, but this may, of coul r^" ^ " ! .""'' ''""°'' '"dependent of the 
the calculations are based WthZrib^.'^r,-^ "" ^""^ "^^ 0° "We" 
-biect to the assumptions I We ^^^71 > 1' ""'• °' "■" *'"'"'' '"''y' ""• 

of my scheme would ^ «,m.^CIti^^: ,T^' " ""^ ~'"='""°'' "-at the initial cost 
but this estimate is subject to adiustlen a, iL > ^^^P-^hase of the current «J.rie.. 

The difference between the ^0: , fp '" ""' '°"°"'"« P"»8~Pb. 
by Mr. E. C. Thomas (,Z^le^'"^'Zl:L IZ' ""'/""■ "'"'"« '"•'' "-«•" -' 
fact that Mr. Thomas has taken crZ Z^^l?^"? \^ """butable in part to th. 
osculations aUow not only for b^wLrwat;!"^',! ""^ ■"" """^ '^^ «" 
scheme, but for subsequent withdrawals SILf,, ^"mencement of the 

by the Actuary, but fouJws from trZt thl !. f T""^ '' "°'' "' «>•»«• "ode 

the average age and average p^ri J of tl r"" °' P*" ""bdrawals is to reduce 

these would Z i, there wr"o v^thZwT^rr ^ """"""• "^ "'"'P'-^ -'" «bat 
«U«Jation of two years' salaries, I^d ^e t^ult is " ''°'' '°"'""' '**"' ""«"• '» "y 
liability. This is unavoidable if witZawirt I ^'^ over-statement of the initial 
to the actual particulars being supp^^te t^i , .'^^^ '° "" ''^''^'>°'^-. ■»• Prior 
the withdrawals. It is no dou^ d^„u, t ""''"^ J-^-^fo-. there is no knowledge of 

initialdeficiency will amount to and rrhelh^ T " "'""'^ " P""*"' ""-"the 
that the deaciency be assumed Cte sit o« Td Tl f '"' '"*' ' "" -"^^ "««»' 
being a mean between the estimls^ one v i °"" ""^ *"'"'•' "^ ""•• " 

probability any deviation of theacCfrolTh ^ ""' '"" ^''"' P""''"«- 1° »" 

to be unmanageable, and, withruX^ ''uvIT :h k t^ "°"" ""' "^ '^ "^^ " 
annual salaries is Ukely to be in excesV of ..r . ^ ^ *""" ""* ""^ » ""^ «»«• the 

"— ~- '" '— ' '- -t:::.ritris .r-tsr 

The Cost of Disabletmit Pensiotis 

m.hei''^e:r:uL?;r.:r whrcait tr" °"' "-* --•'• - »' '•>« 

contributions. It is as foUows :_ "'"'^ " "' »™"8« percentage of the 



Age at Entry. 



35 

ao 

35 
40 
45 

50 
55 



Average Percentage for the period of contribution. 



21 per cent. 
20 .. „ 

19 .. .. 

18 n .. 

16 .. „ 
12 



8 



»» M 



»» l> 



MR. tinner's scheme : COST OF DISABLEMENT PENSIONS. 



233 



These figures are based on the Committee's Hospital Type Case I, with 60 as the 
normal age for retirement, and are practically identical with the results of similar 
calculations relating to Type Case II. It may be useful to give a few words of explanation 
is to their exact meaning. It will be remembered that under my scheme each contribution 
purchases a distinct element of pension, and it will be seen easily that the proportions of 
each contribution required respectively for normal retirement and incapacitation will vary 
from age to age, e.g., the contribution of a man of 30 for the ill-health Pension must be a 
greater proportion of the whole contribution than if he were 59, because in the latter case 
there would only be one year's risk of breakdown before age 60, whereas in the former there 
is 30 years' risk. As a contributor grows older the probability of breaking down before 60 
diminishes, and the chance of receiving the normal pension at 60 increases. What is 
required is an average proportion of the contributions throughout the period of contribution, 

and this is what is given in the above table. 

(Sgd.) T. TINNER. 

15tfc February, 1918. 



'i 



234 



APPKND1CE8. 



|i ( 



lit! 



APPENDIX IX. 



MEMORANDUM ON THE USE OF INSURANCE POUCIES IN 

PENSION SCHEMES. "^""ES IN 

Bt Mb. F. L. Col^s, F.I.A.. Assbtant Actuahv or the Cl«,c„. m. 

lines proposed by Mr. Tinner.'^ Act! u^nV. • . ""'™™""' "d • M"t».l Fund on 
in writing «,n.e figares comparing he ^^1^!,'? "' "» Committ*., I now s„bn.it 
Offices selected in the Feder^ JI'trorSuL /" ''" """ """•y '- °- »' ">« 

Mr. Tinner-s Fund in the fonn o, l^llL 3 7^" '" "'"™™"~ ""- ""^ »' 



Annual Premium of dElO provides an 
Annual Pension 



Age at 
Entry. 



Single Premium of fioo provide, an 
Annual Pension 



21 
SO 

40 
50 



in 

Mr. Tinner's 

" Fund " 

of 



in 

Commercial 

Union "Scheme" 

of 



102 6 3 
67 10 10 
39 12 5 
19 16 



£ 8. ~ar 

100 17 6 



in 

Mr. Tinner's 

** Fund " 

of 



in 

Commercial 

Union " Scheme •• 

of 




bo for the n,o»ent o.itted and rurther'^felr'Jjet TlT'""' "' "'"'"«-•" ""^ 

2. When the Federated System was inaugurated in iqn.i, . . 
the Boarf of Education in recommending the C^to the n . "''""' '""""""^ 

(1) avoiding the responsibility of investment ""'"" """ - 

(2) giving the widest possible latitude of choice to th„ i„ i- m ■ 

(3) restricting the offices to those witl/runel 't M r"""*'' 

Obtaining «ther better term, by jrcirZu" '"""''' "^'^ "«' 
(. -wmg^- migration from one University to another; 1, unlike most other 

.a) preserving ,or the member the ful, benefit of aU contributions when once made. 
3. Disablement was also coDsidAm#1 a^A tu • i • 
was recognised as desirable. ?hetCnL who' w l"" "' T' "^ "' """'- '- " 
panicular objects, vi... Li,e Assumnce a^ .Lu .y Z^'^Z'^'^ '" '-»'' - 
to increase the scope by including benefits payable uponlnTj'f T t. " '"^ '"""■"'"'»' 
could only be determined by medical ex. JnaLn ^' """^^'"l^ »' ^hich 

wisdot '^i^:z:z::^Tz^/:zT'r-^^ --- -« 

thoroughly equipped and experienced. Current event!? 7'"' '"' '^ ~"'l»-«» 

companies to tread the thorny path of ^JZlLZZJ'^'T' "'^ ""'"=""'- »' ".• 
-beoneunder review, does not leave the ■^rr.:rZ:2.Tr:::ZTZ;X: 



MEMORANDUM BY MR. F. L. COLLINS ON INSURANCE POLICIES. 



235 



the *' Commercial Union " Scheme guarantees a return of all contributions with 3 per cent, 
compound interest on withdrawal. The actuarial value of a disablement pension dependent 
on an impaired life is not very large, and its present value seldom represents much more 
than the amount which the accumulations of contributions afford. The question to decide 
is whether it is better to be content with a clear 3 per cent., or to face the market with all 
its vicissitudes in the hope of obtaining for years to come the net rate of 3| per cent, 
assumed by Mr. Tinner for his illustrations. These illustrations are tentative, and 
Mr. Tinner frankly stated that he would have preferred 3 per cent, as a basis. Perhaps, 
therefore, the best comparison is one which contrasts the benefits given by the companies 
with those afforded by Mutual Funds already in existence. In the next Table, therefore, are 
given the Deferred Annuities (With Return) obtained for the same outlay from the Royal 
National Pension Fund for Nurses at 55, and from the " Commercial Union " office for 
female lives, the terms of the latter being calculated on the same scale as was offered to 
the Universities : — 





Annual Premium of £10 provides by 


Single Premium of £100 provides by 


Age at 
Entry. 


B.N. Pension 
•' Fund " 
ex Bonus. 


Commercial 

Union 
" Scheme." 


R.N. Pension 

"Fund" 

ex Bonus. 


Ck>mmercial 

Union 
•' Scheme.'* 


ai 

30 
40 
50 


£ s. d. 
37 9 

23 10 7 

11 19 6 

3 8 8 


£ s. d. 
42 12 3 

26 18 3 

13 14 7 

3 16 5 


£ s. d. 
17 13 

13 10 7 

10 1 4 

7 9 10 


£ S. d. 
19 11 7 

15 1 

11 3 4 

8 2 



The pension age of 55 has been taken as being appropriate in the case of Nurses. 
Bonuses are allowed by the Royal National Pension Fund for Nurses, but, as has been 
stated publicly by Mr. King, the Consulting Actuary, the longevity of Nurses has absorbed 
the chance of the pensions being much increased from surplus profits. On the other hand, 
should the Nurse withdraw from the Fund, she only gets 2^ per cent, compound interest on 
her savings, while the " Commercial Union " office gives 3 per cent. 

5. Another illustration is afforded in the following Table by a comparison of the 
Elementary School Teachers* Fund witli the Legal and General Company's option in the 
Universities' scheme. This relates to the non-returnable form of Deferred Annuity, and 
male lives have been taken with 65 as the Pension age : — 





Annual Premium of £10 prcvides by 


Single Premium of £100 provides by 


Age at 
Entry. 


Elementary 
Teachers' 
"Fund." 


Legal and General 
" Scheme." 

£ S. d. 

— lao 8 

111 12 

- ■ 

:_: 69.17 „ 
' 26 13 


Elementary 
Teachers' 
" Fund." 


Legal and General 
"Scheme." 


21 

30 

.40 

50 


£ S. d. 

130 9 2 - 
85 10 3 
48 13 7,;: 
• ^2 19 -6 


£ s. d. 
56 2 3 

42 12 9 

.30. 5 7 ... 

20 11 ^r 


£ s. d. 
96 11 7 

66 6 

. 42 fi-:3: - 

26 2 



It will be seen that when it comes to tabulating the pensions which can be guaranteed 
for the same money, the Insurance Office is not only able to hold its own, but to exceed 
very largely the anticipations of such a Fund as the Elementary Teachers', in which every 
penny is held in trust and invested under Government supervision. It is difficult to see 
where the profit comes in for Insurance Companies, and that is why Annuities, and 
especially Deferred Annuities, have not been very assiduously cultivated by them. In fact. 



il 



'I I 



236 



APPENDICES. 



"° ""h option, „or return UrtJ^Z^^^T" J°' "'^ 'K"' «'P~i»Uy « there i. 
» penniles. «dow to teU her th.t if Ztrl ^ T ^^'^^ *■" " '» «»" "'"to for 

bee. bigger through adopting tha tl^^''" ';"" "'"'^«'' >•« I«-o„ would have 

pnmarily with Superannuation, but wheTthathrb- ' '"'""°'' ^•""' ""-"■«» 

OT-han, ie the ne,t den>and. iJlg r^' ^ ,1^" ^P"*^ " ^-d for widow. «.d 

mor« and more into vogue, and Jo^ZllT, '^°''r'" ^"'^'"^ ""^ «>"• 
«multaneously. These often con.priee^eontlT^rTu'" """"^ ■»"• "q-^-enU 
» certain age, in buying a Pension 0^8'^^^" "'rtb' * T'"^ """• ^"^ ^able at 
can accept the offer, unless meantime fin^™^ "'*;• °'*"''«''' be-*!- » then good. h. 
terms are obtainable elsewhere. If, „n the oth« Tf T ^™ "" '"'"8«' "»' better 
.nvest the money to better adva^^ h^ "l"' "» .""'"> " P"«»rious, h. can 
of pensioners shortly after their ,»ti™m«„f ^^ """^ °° ""* PW^'ture death 
Superamiuation Act of 1909, whicTTnX CmI'^^'I. *" "" •»»'"« <" 'be 
for sut.eths, to carve a lump sum as weU « a ml ^"""- "> ""bstituting eightieth, 
superamiuation allowance. Uberal as"te "shtfeth^^ " *" '^«" °»' »' ">«'' 
to meet with the appreciation it de^^ owbJt ; ■ •""^""'"«^'y ««■ " faiW 
alternative to an income for life. ThrZlir^ "'^'"'^ '" ■"" P"*"''"* "J 

Superannuation Act of 1869 is likely L Zt'^ u"" ""^"^"^ '" 'b* «"• of the origin J 
»me provision for dependants is made hI ° th" T- t,"' ^'""°° ^'■•"«' "■J"' 
Pension Age. By ascertaining the amou!lsTh •^^'"^ °' * '^'' »?"<»• »' *b. 

md.catio„of therateofintej at VhTclthl , , T^""' °'" ~" «"" '•"">« « '•!- 
years of service, which is the mUimnIrt T "''"' ""*'"« -nested during the 
the money. To illustrate this, the «l„fC^' t"!"" '" »'"«'°'''« 'be best «tu^ on • 
butions, by effecting With P;iit Endo^eTT ' "" °'"^*'*' '"' "» '<"»' ^-tri- 
the ligures being taken from page7of th^ffi •^^""''°"' " ''"'™ '" "» '""owing Table 
System for Universities:- '^ °' ''" °*'"'' ^""P*^' -"'be Federate! 8uper«.nuati« 



Office. 



S)rstem. 



Clerical Medical and General ' (a) Ordinaiy Bonus 

Equitable I i^} Tontine Bonus 

•.. (a) Ordinary ... 

I^gal and General i?? P^j?**^® Endowment 

^ "• ••• I (a) Ordinary 

United Kingdom Provident ! f^j ^nt!:,!:^"^''"' 

(b) Temperance Section 




Compound Intenat yielded. 



Without any With flg. 6d. 
Income Tax Income Tax 
allowance. aUowed. 



25, 3a and 50 "spectively,'^!^»^„^ '"""t Endowm«,t Assurances taken out at 
the P^f,.«„ ^ ,^ ,^ tTe utivlr^^Thr'"" "'Z""' *"« "' """* " P^'' by 
"ceivable at maturity at 60 represents^X^Ioo T ""^' "'^'"' "«' "»»•«'» 
npon the Income Tax allowance which ILt^f^^ " ^'^'""' " P*^? '>«P«'d»t 
the outlay, and the return of interJt on^l^rrlT- """"'" "" ^" ""'•y- This^uce. 

"8t on thi. form of mvestment i. proportionately higher. 

7. The War has been a vi*rrr 
it i. a remarkable fact, testifyin^lThe" td' °T ^""-P™* ?<""' «" ^ OfBces, but 
Ute Mr. Ackland. under whoL ^rij tie ^/"''«°'*'" °' "•» '»'« ^ir G. F. Hardy and tl. 
an of Which have mad, a Valua«r.n1';^r BonT ''^f'' "^ »' "- '»« 0^ 
-nt^mng the full rate of Bonus on ^c: fhrr^ r^lT ' f ""^^ " 

wuiw» are cased. In any case the 



MEMORANDITM BY MR. F. L. COLLINS ON INSURANCE POLICIES. 



237 



Bonuses of the future should tend to improve. As more normal conditions return, and 
especially if Income Tax be eventually reduced, the high rates of interest at which Life 
Office funds are now invested must bring about a higher rate of Bonus distribution than 
has ever been known in the past. The bulk of the profit available for Endowment Assurance 
Bonuses is derived from the margin of interest earned over and above that assumed in 
making the Valuation reserves. The Valuation reserves are relatively heavy, as the rates 
of premium after providing for the current risk of death leave a substantial margin for 
accumulation to meet the ultimate liability. Therefore, any improvement in Bonus results 
is likely to be emphasized in the case of Endowment Assurances. Apart from this, howevrar, 
the gradual building up of the total amount receivable at maturity, by successive additions 
to the sum assured, is in itself an advantage, as it reduces the cost by limiting the death 
benefit in the early years when it is least needed to a smaller sum than if a non-profit 
guaranteed contract were effected. Service Tables of various Pension Funds show quite 
clearly that the Death Benefit will be required in far more cases than the Disablement 
Benefit, but the main cause of members dropping out year by year is " Withdrawal." For 
it is an inevitable fact that the large proportion of those who enter a given service do not 
remain to the pension age, and many of them leave in the early years following entry. 
The majority of those whose circumstances obhge them to provide from their earnings for 
their old age, deliberately choose an Endowment Assurance of their own accord. This 
suggests that it is regarded as a far greater benefit for a member after he has relinquished 
his membership and withdrawn from the service to be in possession of an existing 
policy with every inducement to maintain it, than to be presented with a lump sum as a 
return of contributions or surrender value of a Deferred Annuity. Further it is only while 
Deferred Annuities are connected with a Superannuation Scheme that the foregoing Income 
Tax allowance can be claimed, whereas the annual premiums paid under an Endowment 
Assurance continue to rank in any case. As is well known, these Income Tax privileges 
were revised recently in the Finance Acts of 1915 and 1916. They may thus be assumed 
now to have been placed upon a fairly permanent basis. Three shillings in the £ represents 
the maximum, and the allowance can be claimed upon annual premiums for Endowment 
Assurances not exceeding one-sixth of the total income nor 7 per cent, on the sum payable 
at death. Under the Federated Superannuation System for Universities, the member on 
leaving the service would be able to enjoy the Income Tax allowance upon the whole of 
the premiums should he elect to maintain the Policies to maturity, so that the yield would 
be even better than those given in the last table where only half the premiums have been 
taken into account for this purpose. 



i 



8. Another feature in connection with Income Tax, which I put before the Committee 
on March 22nd, is the fact that Life Offices are able practically to invest the premiums 
on Deferred Annuities as part of their Annuity Funds free of Income Tax. This may 
account to some extent for the favourable rates already shown. Of course a Mutual 
Fund would be able to do the same when it had been in existence for a sufficient time for 
its incumbent Pensions to equal its Interest Income, but that is a condition of affairs 
which could not arise for many years in the case of a newly established fund. 



9. Objections are sometimes raised with regard to medical examination, which is a 
necessai^ preliminary to effecting an Endowment Assurance, and as regards the existing 
staff there will probably be cases in which the only way of surmounting the difficulty 
would be by retaining Deferred Annuity Policies (with return) as an alternative in case of 
need. As regards future entrants the medical examination is almost an advantage from 
the employers' point of view, as it has the effect of throwing upon the insurance offices 
trouble and expense which might well be incurred in any case. Naturally, the influx of 
any number of weakly members will have the double effect of reducing efficiency and 
producing claims for disablement. Hence, Mr. Tinner contemplates the medical examination 
of entrants to his proposed Mutual Fund. Whatever precautions may be taken, however, 
a certain number of cases of disablement are bound to arise for which a scheme of 
Endowment Assurances makes no direct provision. On the contrary, when a member's 
health breaks down he may find it hard to maintain his Policy owing to impecuniosity. 




238 




APPENDICES, 



T'^-'^r'*'*^^^^^ information „ to th. 

n every fiv. dies i„ the 6nt y^r touZ^ ^ecZ'" '" '"^ «"« '"■»•'«. almost on. 

foUowng year, of the remainder, oner ' "°""!"«'«"«''» <>' the Jlowance. In th. 

Under such circumstances, to surrenXr J ^•' *'""'8'' ">« "ortality is always excessive 
wrong, a point mnch «^ucing rrandi!:^ "°°'"''°« '^"' '«■»«"' '« obZ:; 
^™w.ng „„ the policy to pay the ^^^^^ Zm ^'^ '"^'"^ "'"■• ^y 
m many cases will not run for very loL JhT' ™"*'' "*«'"« ""at p,emi„„. 

profit from the misfortune of their noIL T ,,, °™' ""^ '«'™ "o wish or need to 

;^^ngitmnstpay tomaintain';;ietr:':ro,e ^d '^'^"""^ " """ "»"« ^^^ 
W.U pay m any individual case. Sufficient cases musM "°' '"**'^"'>- '""o" 'h"' " 
•nd a common fund of some sort would be 1!^L ,. *""'""''»«' *» give an ave«ge. 
upon for such cash payments of pensions a„? ^' '"'"^' "'''«•' oo-Jd be d3n 

Why t.d.sah,ement difficulty could not . -v^T^Xfy^C.r J;:,— 

oontnbufons with a substantial rate o^IuZ^'T °'"' '" ">* '»' ^able. «tnm aU 
heavy death bene6ts in the case of aU metT™ 1 ^T^"*^ «?«««« and after paying 
The exphnation is that during the p7st ^^ I u''"'"""' '«'''"«•<' Pension U 
excess of what is re,uired for'actual 1™ 1"T ''Vk"" «-"■»"''"«> «Be^es Ll^' 
on a very smaU mai^in of p„>6t. whi ewL T ^? "^"^ '"'"'''' "^em to t Je 
ments. Ofices of to-day e xempli,; th d^e ofT ^"^ '""'''' '''"^ ""« •>«" '"-t 
the couTBC of their history numhe,^ of otCcl' '"T"^ "' '"^ «"«'" »«rin« 

ceased to exist. Starting a new Company 1 ZL7 T' "^ ""« °' ^•'"■'•" havf 
ex,stence would appear almost foolhardy yet th^'^.'" ""*" " ""'' "^o «' their 
*o ao for without some strong finan ,^'1^^ .L' I t " "»'" " ^"""^ "^^ «««»" 
Fund ,, m much the same position as a new ZTf^ Offi T'"" """""K"'"'''* a M«tu!l 
-thout even the moOO statutory dep<^twhlh ?h!^ "° P~P"«'«'y »pit.l, and 

to prevent the growth of such conjms H e pJl' :.^r "'"" -" ">o«ght necessary 



27<A July, 1917. 



F. L. COLLINS. 



«n«M OK ™. ...STXOK 0. ..S.BX.M.KT P..SXONS 

th^ who,;ai;^rrrdor:tfi:^^^^^^^ - --- » - -. », 

Table has been prepared. This is based on the assumnln 1 T"°° '""''• " '""her 

cases wm occur to yield an average, and that t ,e mo7a L 1 *• ""f"' ""'»'«-' -h 

the ^ferr. Annuity Clf^Js rBTmltrry'rr ";."'* ''"»'"- 
which occurs m the early years following retireml! 7 ^u ' "" *■«'' ""ortaUty 
prospects of longevity of a recipient of a difabTeirtJ, * f"^' °' "" -">"«'-« th^ 

.t may be said that for the time being his UfeLmueh ^ ' '"' "'"""" «a««e™tion 

octogenarian. This has the two-fold eir«t of "tlr/r"^' "" "»">'» healthy 
payable at death and diminishing the value of hlfT ^ ™'''* "' ">• »»«' assured 
weU a. the cost of the pension. For thlTutll , "'^ •'""'°°" ^able to age 60 „ 
interest has been reckoned, and it CZ^Zf^^ '"T ™'- «* % ~ J«n" 
asaured at death for every year until age . i^rhranTrCn'r^aftl^ -" 



MEMORANDUM BY MR. F. L. COLLINS ON DISABLEMENT PENSIONS. 239 

The number of years* purchase that an annuity payable until that age represents has been 
calculated for arriving at the value of the future premiums. For determining the amount 
of pension, \vhich the net value of the policies suflBces to buy, it has been necessary to 
extend the calculations so as to embrace the years of life after age 60, again using the 
Elementary Teachers' Mortality Tables. Tlie following table shows the results in the case 
of a breakdown in health occurring at various ages in each of the three Type Cases adopted 
by the Sub-Committee for illustrative purpose {See Appendix X). In adjacent columns are 
shown for purposes of comparison, the corresponding pensions which would be allowed 
under a scheme providing one-sixtieth of the average salary for each year's service, and 
also those suggested by Mr. Tinner, who has kindly supplied me with Tables for age 60 on 
the same basis as those calculated for age 65 in his original scheme, but with a fixed 
contribution of 10 per cent, as in the case of the Universities System. The calculations 
were duplicated so as to include the estimated policy results of the two Companies already 
quoted by the Sub-Committee. (Office A and Office B : See par, 418.) 



Age next 

birthday 

at 

breakdown. 



Value of Sums 
Assd. and 
Bonuses. 



Office 
A. 



Office 
B. 



Value of 

future 

Premiums 

(both 

offices). 



Net Value of 
Policies. 



Equivalent 
Pensions. 



Office I Office ' Office 
A. i B. A. 



Comparative Pensions 
based upon 



Office Sixtieths of 
B. Average Salary. 



l\[r. Tinner's 
Method. 











Type Case No. 1. 








35 


£ 
1,027 


£ 
917 


£ 
179 


848 


£ £ 

738 132 

i 


£ 
115 


£ 
37 


£ 
56 


45 


1,735 


1,509 


339 


1,396 


1,170 168 


140 


113 


140 


55 


2,386 


2,086 


215 


2,171 


1,871 i 265 


228 


216 


220 











Type Case No. 2. 








35 


762 


668 


104 


658 


1 
564 102 i 

1 
1 1 


88 


35 


59 


45 


1,115 


944 


177 


938 


767 112 

1 


92 


74 


101 


55 


1,595 


1,383 


146 


1,449 


1,237 177 

1 


151 


136 


148 











Type Case 


No. 3. 








85 


639 


568 


104 


535 


464 


83 


72 


26 


39 


45 


973 


846 


177 


796 


669 


96 


80 


65 


82 


55 


1.302 


1,135 


112 


1,190 


1,023 


145 


125 


115 


121 



12. This Table is sufficient to show that if the policies were pooled and held upon trust 
to provide disablement allowances for the survivors, they should, in the ordinarj' course of 
events, amply' suffice to give just as good pensions as, and at the youngest age far better 
pensions than, either of the other two plans. Bui a word of warning must be sounded, 
because the better the pension the greater the difficulty of ensuring adequate medical 
supervision, which is essential to provide against anything in the nature of malingering. 
It would therefore be prudent not to give pensions any larger than those contemplated by 
the other plans, and, after a few years had elapsed, to investigate the mortality in order 
to see whether it was necessary to revise the standard. Then an Actuarial Valuation 
could be made of the existing policies and the prospective liabihty in respect of the 
Incumbent Pensions to the survivors. If such a valuation showed a surplus owing to 
excessive mortality, this could be used either to increase the pensions, or to provide for the 
dependants (if any) of the deceased pensioners, as might be deemed the more satisfactory. 

F L. C 

2Ut August, 1917. 



-/.i. 



I 



M 



240 



llli 



1 1 

1 



APPENDICES. 



provided by the past contributions itnht^fo'rf''' """""" '»"''«'" ''"'-" 
for disablement is affected by the d Ju ion 17 ^e i ' tt! *" ~'"'''" '■■'" '« P™™'"" 
date of retirement in the form of the !^^ Ll ^^' "'"'"' *"" «»"■«' "P *« 

Superannuation System for Universities T J^ T"""^ «>ntemplated by the Federated 
from the values available for ^Lun d 1>' '^""'' ""'"'' """"^^'o'on-ittinK 
benefits in aspect of these paid-uSel."'"'"''"'^"' '»"'»'"• ">« values of the death 

.Hat t'^nLitt tz::::rmSr ' 2 ''- '^- '^ ^- ---« 

but that the benefit already secured by the w coltl t ™""'^ '^ » ^''*™' ^^^ " 
ow^^estateintheev^ J,„„ .fe Pe"::: Z riC:!"' ™""^''' 



Age next 
birthdiiy 
at , 
breakdown.! 



Valne of Sums | 

Asfid. and Valn- «« 

««"— futu«' 
__ I Premiums 

0™» offices). 



Office 
A. 



Net Value of 
Policies. 



Equivalent 
Pensions for 
life provided 
thereby. 



Office 
A. 




Office 
B. 



Comparative Pensions 
based upon 



Office Office j Sixtieths of 
A- I B. Average Salary. 




Type Case No. I. 



Mr. Tinner's 

Method 
(«w par. 11). 



496 



£ 
88 



732 621 I 88 
1.384 1,232 I 169 



Type Case No. II. 





Type Case No. III. 



35 
45 
55 



441 


401 


104 


337 


297 


52 


46 


585 


527 


177 


408 


350 


49 


42 


868 


788 


112 


756 


676 


92 


83 



26 

65 

115 



89 

82 
121 



n.ore"bbe^^ctor:ir t ^^Ts rr ""•' ' ^"' - -» — 

-»parison. It has been suggest J to me tit Mr ^T "^^ "^ "P«"«J 'or 
be adopted as a standard to be aimed at !l, T' '*"'''""' "'k'" '"'^^ly 

The relation of the reduced pensions tolhisstT^d . ' ^"" "" '"""«' cl0»lation,' 
..hat in each of the type ^ses tli^ ^mT1:L":'Z''- ^i^ '""" "^ "°"-' 
disablement. At age 3S there should be sufficil^^ «>»»'derably with the age at 
the proposed standard scale, but at 1 45 o^^ t ^kT'" " "^ P'"''"" » 
subtracted is very valuable, the pendonslLluLlJ: 'act that the death benefit 
whUe at age 55. owing to the compa.:u™rs^rttm^ d "?f °' """ " '^-^■■ 
enjoyed befo™ 60. the proportion automlul^vl'd-.''""'''' *'""'' ""> ''«'"' benefit is 

--aardadopted. -.er to ^timTi rrr.r:r:er rp^^^ 



MEMORANDUM BY MR. F. L. COLLINS ON DISABLEMENT PENSIONS. 241 

represented by these Endowment Assurance Pensions, account must be taken, first, of the 
fact that disablements do not occur in any great numbers at the early ages, but are 
concentrated very much in the 10 years before age 60 ; and, secondly, of the fact that the 
pensions at those higher ages are in themselves much larger than in the case of the early 
retirements. Allowing for these two factors as far as possible, I find that the all round 
proportion of the pensions which can be provided by keeping up the policies may be taken 
approximately at something like 66 per cent, of the standard adopted on the assumption 
that the experience will conform to that of the Elementary School Teachers ^Males) both 
as regards the number of disablements, and also as regards the average duration of life in 
such cases. 



15. While the relative proportion of a reasonable scale of disablement pensions which 
could be provided by Endowment Assurances, and by keeping them in force, is thus shown 
to be about two-thirds of the total, the problem of fixing, in the case of a concrete scheme, the 
present absolute cost of the Disablement Pensions as a whole, and therefore of a subsidy of the 
remaining one-third, is shown in App. XIII, and the relative paragraphs in the draft 
Report, which have been put before me, to be very complex. In the first place it is 
necessary to fix upon a basis for estimating the probable disablements occurring at the 
various ages, and for this purpose the Elementary Teachers (Males) experience has again 
been chosen, although in the absence of more complete statistical records the suitability of 
this basis is mere guess-work. From App. XIII it will be seen that, in comparison with 
other Funds, the numbers of early retirements in this experience are rather light when viewed 
in relation to the number of members in service at 60, but in App. IV the numbers of actual 
retirements from the Hospitals on account of " ill health " before age 60 are small, and the 
numbers occurring before age 50 are almost negligible. The introduction of a regular 
pension scheme would, in itself, completely alter the present state of afifairs, but the fact 
that the Elementary School Teachers' experience is a most recent and extensive Table 
showing the rate of disablement in a service under Government supervision is arecom- 
mendation for taking it as a guide. Reckoning compound interest at 3J per cent, the 
following Table shows the percentage of salary which would have to be set aside and 
accumulated in each of the three Type Cases from the original date of entering the service 
in order to provide disablement pensions of the proposed standard amounts : — 

Future appointments with Salaries as shown in Appendix X. 



Type Case No. 



I 

II 

in 



Age next Birthday at Entry. 




Percentage of Salary to be set aside for 
proposed Disablement Pensions. 



8. d. 

17 2 

17 4 

17 3 



16. It will be seen that the scale of salary progression does not afl^^ect the cost in the case 
of future appointments, doubtless because the standard pensions are calculated on the money 
purchase principle. Allowing a margin, one per cent, of the salaries may be said to suflBce to 
provide the disablement pensions ; and this would amount on a salary list of, say, £300,000. 
to a total cost for disablement of £3,000 per annum in a fully established scheme. Thus, 
if only one-third of such pensions had to be found by a central body, an annual subsidy of 
one-third of one per cent, of the salary list set aside and accumulated year by year ought to 
suffice to supply the deficiency caused by preserving for members so much of the death 
benefit under their Endowment Assurances as had been paid for by the past contributions. 
Regarded in the aggregate a subsidy of this kind would commence with a ver>' small sum 
in respect of new appointments and would gradually rise in course of years, when the 
whole of the existing stafi"s had been replaced, to about £1,000 per annum, being one-third 
of the total cost of £3,000, if the total salaries should remain at their supposed present 
amount of £300,000. 



242 



APPENDICES. 



it 



"y w.y ; wherea, the Sub^oa-miZTund^u;. " ""'' »" »<" «» »« included in 

De.l,„g fi„t with the question of ibTtol^tTT/' ^^ ''" ""^ "•<"■" >« »«'•"'«>• 
'he o«e of the existing .taffs, it d^^tfl , "^ " T" " "''^"" '"'"" "*"'"* " 
««'. per .nnum ., the total o^e foTvo„n„ " """ ""■ '""""'"g «»"»»te of one per 
of £300,000. taken a, they sta^col L " !^" """ '"'""8 "^'- "*"> « »W SI[ 
of *3.000 per .nnun. fC^ ' ^^^^ CJ'^^ '" » -P«' <" '«'- serviceT^c^ 
contacted to show exactly wha^T thT ." "* ^''"' *•" ""^'o" >»•■> 

d^ablement pensions calcnlaJon the J 'J^"r 'f" " '«'°«'- """JO ^ 'h. cost of 

_^____J_^^^ce«with^^^ as shown in Appendix X. 




Taking these results as a cuide T f m«i, * , 

pensions in ,.spect of Lre l^t^Tl^ ^^^^^^ the disablement 

-th the age in the case of an exC^^g t J p^T ^ '' ^^^ "*^^^^ ^--»^- 
15b. per cent, would suffice instead of the 1 73 ^ "":' '''" '' ^^*«' "^^•^ about 

entrants. Thus, there seem to be «ounl ] \?' ^" ''"'' ^'""^^"^^3^ ^^^'^^a^d for new 
I^Btof £300.000 per annum^h^rrl^J/lT^T '""' ^" '^^ «"PP<>-<^ ^^^ 
-.at in paragraph, ^.en apph.t tt t^^^^^^^ 

'^^P'^^^^^^^^^ of one-third of this amount, as 

e-s^.g staff as regards its future seX r ' 7,7"'': P^"--' -n be applied to an 

disablement is imminent would fail " Tss the n ' '''' ""' °' '^« ^^^^ -^en, 

would not be possible to count on heln frrp . ^""^ '"^^^'^ examination, and it 

disablement pension to be entered uZ, proximate to the total cost of a small 

estimate of one-third as the p:trna;:rs:T'; n^° ^'^ ^''^' ^-^' ' '^^^^^ 
appbed to the great majority o^ the oZ vt : f °° ''^ '^'^^"^ ^^^^ -'^^^ »- 

«e«. VIZ.. to all cases m which it would not be 



MEMORANDUM BY MR. F. L. COIJLINS ON DISABLEMENT PENSIONS. 243 

impracticable to set up Endowment Assurances. While, therefore, the initial annual 
outlay of the proposed Central Body ought not, on the supposed Salary List of £300,000. 
to reach anj-thing like the total cost of £3,000 per annum arrived at in paragraph 17. 
it seems clear that it would exceed the £1,000 contemplated in paragraph 16. My 
calcuUtions suggest, however, that it would fall steadily towards one-third of one per 
cent, of the salaries as the older members of the existing staffs become eliminated. 

19. It may be of use to consider now the cost of disablement, on the supposed 
standard scale, in respect of the past service of an existing staff. I have therefore taken 
the Type Cases of Hospital Officers for the same durations of service as in the foregoing 
estimate of the cost of disablement in respect of future service, and have calculated by the 
Elementary School Teachers (Males) experience, with 3^ per cent, interest, the amounts 
required in each case to place an existing officer on the same footing, so far as disable- 
ment is concerned, as if he had cJontributed throughout his service. The following 
Table shows two alternative methods of meeting the liability if the Committee think 
fit to recommend its assumption : — 

COST OF DISABLEMENT IN EESPECT OF PAST SERVICE. 
Type Cases of Existing Officers with Salaries as shown in Appendix X. 



Years of Service. 


Age next 
Birthday when 
Scheme begins. 


Current Salary 

including 
Emoluments. 


Additional percentage 

of future Salary to 

be set aside in 

respect of past 

Service. 


> 

Lnmp Sum in liea 
thereof. 






Type Case No. I. 




10 


34 


£ 
300 


£ s. d. 
4 8 


£ s. d. 
19 6 


20 


U 


525 


1 10 


71 14 


- 30 


64 


625 


3 16 


120 






Type Case No. II. 




10 


30 


175 


5 8 


13 4 


20 


40 


225 


17 10 


40 4 


30 


50 


375 


2 7 3 


74 16 


Type Case No. III. 


10 


34 


185 


6 8 1 


14 2 


20 


44 


275 


1 4 10 


42 10 


30 


54 


325 


4 5 

• 


65 18 



20. I have also tried similar methods in the endeavour to throw light on the amount 
of the iar greater cost of ordinary superannuation in respect of past service. The amounte 
needed in similar typical cases, if Endowment Assurances on the terms shown in the 
F.8.S.U. pamphlet were effected in Office A and Office B respectively, are shown below. 
I should explain that the ultimate pensions here contemplated are not those of the standard 
scale which have been adopted in the disablement calculations. In this case the 
benefits are those of the Universities' system itself. As the Endowment Assurance 
Tables in the pamphlet do not extend to entrants over 50, the Deferred Annuity (With 
Eetum) .Table of the Commercial Union Assurance Company has been adopted instead for 
members of 30 years* service. 

Q 2 



244 



! 



,M 



h ^ . ^ 



APPENDICES. 



COST OF ORDINARY SUPERANNUATION IN RESPECT OF PAST SERVICE. 
Type Cases of Existing Officers with Salaries as shown in Appendix X. 



Years of 
Service. 



Age next 

Birthday 

when ' 

Scheme 

begins. 



Current 
Salary 
including 
Emolu- 
ments. 



Additional percentage of future 

Salary to be set aside in respect 

otpast service. 



Office A. 



Office B. 



Lump Sum in lieu 10 per cent, of 
thereof. j past Salary 

accumulated 

_l at 3 per cent. 

Compound 
Office A. Office B. Interest. 



10 


34 


20 


44 


30 


54 



Type Case No. I. 



£ 
300 

525 

625 



£ s. d. 

2 12 3 

11 16 

57 4 



£ s. d. 
2 6 8 


£ 
203 


£ 
192 


215 


10 8 


799 


728 


799 


51 8 


2,000 


1.800 


1,786 



10 
20 
30 



Type Case No. II. 



30 
40 
50 



175 
225 
375 



3 10 

9 8 3 

29 8 



2 4 10 

7 11 10 

28 14 




10 
20 
30 



Type Case No. III. 



34 
44 
54 



185 
275 
325 



3 17 
14 
60 14 



3 8 10 
12 6 
54 4 



148 

471 

1.100 



141 
427 
984 



152 
465 
974 



c^ !!' ^^'^^^''^^ '^' ^^"^*« '"^'^-ted in paragraphs 19 and 20. it is clear that in the 
Te; thT "LT:"^" .^' 'T"^' ''^^^ -'^^ -^^ -Pidly approaching retirement at 
woulThl , ^ u\°^ ^''^'""'y P"°'^"°^ ^" ^P^' °' '»•« ^'^^'^^ of their past service 

be brought m to the scheme from the outset. For ordinary superannuation in respect of the 

he schemrh "T' ""k °' ^'^ ^^^^ "^'^^ ^^^"^^ ^^^ ^^^ "--ed in the past had 

nZt If T hi ! J'^f '"' ''"^ ""'^^ ^°^""^"^*^«^ '^^ ' ^^ -*• --pound 
h^^Iditi ''"^'iT' """''' " ^^^P*"^^' P*«^ ^-'- -- «^- to be inckded, 

sum might be needed for ordmary superannuation. Combining the two. the total 

aT Z cen: '"' ''''T:' '' ^^ ""^^ ^' '''' ^^^^ ^'^^•^^««' '^^ *« ^ ^^^^^ 
wid! r^T r " ""*• '* "'" ^ "^^'^^^ ^^•^^ ^»^« ^»^«^ t>T,e cases exhibit 

wide vanations m the proportion borne by the hypothetical accumulati^s of the pa 

Llf 1 TT .K T . ^°^"-*^y *^e — nt salary Hst does not form in 

Itions ;: Zbt' r. " """^'°^" ^'^ ^^^^^ ^*P^^^^ -^* °^ P-^ -vice 
pensions. To enable me to do so properly, full particulars of the ages, duration of service 

and salaries, past and present, of the existing staffs would have to be furnish^ Tt" 
such information it would also be possible to make closer estimates of thecosTof 

mltTh T / '::, ''^ ^*" ^^ ^^^^'^°^ °«^-- ^-1-- arrived at b^ thj 
method I have been forced to adopt, of reasoning by induction from the results in tyjcl 
cases, mus^^obviously be accepted with some reserve until fuller information be forthd^ 

woTdL d Tr" °' ''^^""' '"'^'^ '^ '-''' '^^'^ - -«^"^« ^-»>^— t. and much 
would depend on the circumstances in the case of the Hospital Service as to whether the 
foregoing estimates would be fulfilled in practice. 

22nd February, 1918. 

F. L. C. 



TYPE CASES OF SALARY PROGRESSION. 



249 



APPENDIX X. 



TYPE CASES OF SALARY PROGRESSION USED FOR ILLUSTRATIVE 
PURPOSES IN THE TEXT OF THE REPORT. 





Case I. 


Case II. 


Case III. 


CaserV'. 


A«». 












Officer. 


Officer. 


Dispenser. 


Matron. 




£ 


£ 


£ 


£ 


20 


— 


60 






1 


— 


70 






S 


— 


' 80 






8 


— 


90 






4 


100 


100 


80 




as 


110 


100 


80 




6 


120 


100 


90 




7 


130 


130 


90 




8 


140 


130 


110 




9 


150 


130 


110 




80 


175 


150 


120 




1 


225 


150 


130 




8 


225 


150 


140 




8 


275 


150 


150 


50 


4 


275 


160 


160 


55 


SS 


325 


170 


170 


60 


6 


325 


180 


180 


65 


? 


400 


190 


190 


70 


8 


400 


200 


200 


75 


9 


450 


200 


210 


80 


40 


450 


200 


220 


90 


1 


500 


200 


230 


100 


a 


600 


250 


240 


110 


8 


500 


250 


250 


120 


4 


500 


250 


250 


130 


46 


500 


300 


250 


140 


6 


600 


300 


250 


150 


7 


600 


300 


250 


150 


8 


600 


350 


250 


150 


9 


600 


860 


250 


150 


60 


600 


350 


300 


150 


1 


600 


350 


300 


150 


a 


600 


350 


300 


150 


8 


600 


400 


300 


150 


4 


600 


400 


300 


150 


66 


600 


400 


300 


150 


6 


600 


400 


300 


150 


7 


600 


400 


300 


150 


8 


600 


400 


300 


150 


9 


600 


400 


300 


150 


Additional 










emoluments 


25 


26 


25 


50 


taken as 












246 



APPENDICES. 



APPENDIX XI. 



iiM 



DEPARTMENTAL COMMITTEE ON SUPERANNUATION OF OFFICERS OF 
REFORMATORY AND INDUSTRIAL SCHOOLS. 



SPECIMEN PENSIONS. 
For Males entering the Scheme at ages 25, 30 and 40. 



Age at Entry 25. 



AgB. 



Scale of Salary, Ac. 



Age at Entry 80. 



i 



}4 



I ; 





£ 


£ 


£ 


96 


80 


80 


120 


SO 


90 


90 


150 


m 


100 


100 


230 


40 


100 


150 


270 


4& 


120 


150 


300 


fiO 


120 


150 


350 


6S 


120 


150 


350 


60 


120 


150 


350 


66 


120 


150 


350 


Approximate 








pension at 








age 65. 


668 


781 


156-3 



Age. 



Scale of 
Salary, Ac. 



30 
35 
40 
45 
50 
55 
60 
65 



£ 

100 
120 
200 
250 
300 
350 
350 
350 



Age at Entry 40. 



Age. 



Approximate 

pension at 

age 65. 



1121 



40 
45 
50 
55 
60 
65 



Scale of 
Salary, Ac. 



1 



Approximate 

pension at 

age 65. 



For Females entering the Scheme at ages 25 and 30. 



Age of Entry 26. 



Age. 



Scale of Salary, Ac. 



10 
16 
40 
46 
60 
66 



66 



Approximate 

pension at 

age 65. 



£ 
40 
45 
50 
60 
60 
60 
60 
60 
60 



30-9 



£ 

50 

60 

70 

80 

80 

100 

100 

100 

100 



Age of Entry 80. 



Age. 



Scale of 
Salary, Ac. 



44 



£ 
80 
90 
100 
120 
120 
150 
150 
150 
150 



66-2 



30 
35 
40 
45 
50 
55 
60 
65 



£ 

100 
120 
130 
130 
160 
150 
160 
150 



Approximate 

pension at 

age 65. 



611 



£ 

150 
200 
250 
250 
250 
250 



85 



' ^ ' I _ ■ - . »■ 



SPECIMEN PENSIONS (REFORMATORY AND INDUSTRIAL SCHOOLS). 247 



SPECIMEN PENSIONS FOR EXISTING OFFICERS WHO ARE BETWEEN 
40 AND 60 YEARS OF AGE AT DATE OF COMMENCEMENT OF SCHEME. 





Salary and 
Emoluments. 


Years of Service 

already 

completed at 

C!ommencement 

of Scheme. 


Approximate Pension at Age 65. 


Age next 
Birthday. 


In return for 

10 per cent, of 

Salary. 


Free 

Suplementary 

Pension. 


Total 
Pension. 


Males. 
58 
58 
50 
50 
45 
45 

Females. 
58 
58 
50 
50 
45 
45 


£ 

355 
230 
255 
102 
223 
104 

135 
70 

128 
65 
65 
64 


19 
26 
30 
.9 
17 
3 

39 
14 
28 
14 
20 
5 


£ 

291 

18-9 

52 

20-8 

66 

30-8 

9-9 
51 
23-4 
11-9 
17-3 
17 


£ 

67-5 
59-8 
62-2 

7-5 
24-9 

2 

52-7 

9a 

291 
7-4 
8*6 
2-1 


£ 
96-6 
78-7 
114-2 
28-3 
90-9 
328 

62-6 
149 
525 
19-3 
258 
19-1 



ARBITRARY SCALE FOR VALUING EMOLUMENTS. 



Superintendent (man, unmarried, or with wife who 

is not an ofl&cer of the school) 
Superintendent and wife holding appoint- \ Supt. 

ments of Superintendent and Matron ... / Wife 

Superintendent (woman) ... 

Matron in Boys' School (not being wife of the 

Superintendent) 
Schoolma8t«r, or officer of same rank, living in 

a provided house ... ... • • • ■ ; • ^ 

Schoolmaster, or officer of same rank, living in 

school 

Schoolmistress living in school 

Other officers (men) living in school 

Other officers (men) living in provided cottages ... 
Other officers (women) living in school 



Houses or 
Rooms. 



£ 

45 

25/^ 
30 

20 

25 



Board and 
Laundry. 



40 
40\ 
30/ 

40 

40 



70 



15 


30 


14 


26 


14 


26 


10 


26 


14 


21 



Coal and 
Light. 



15 

lor" 

10 
10 



TotaL 



100 

140 

80 

70 

25 

45 
40 
40 
40 
35 



248 



u ■ 

ill 
it 



APPENDICEfiL 



APPENDIX XII. 



appealed in'lhl'l "*"f /" V^'° '"" *" "^'^'^ ^ *»^« -»>i-t of Annuities that 
appeared m the Economist of October 14, 1916 :— 

•• It 'IslZ^T^'l T"T '' """^'^ °' «""'«' importance than it i, for .nnnitie,. 
" oWlvT H r Tl '' "■' '"""■"'' *°"" '««>"Pl«"». but it should be so 
■• dotbtLl aZ " """"""^ "'* '™" '" ""> •"'""'-"■•K ""-^ <>' 'he most 

■• allv ' 1'°"T T""'^"'- ""■ "°""'y '"' •■'"»''«"• '" «"'■«•«» life offices 
amply complies with these exacting conditions. 

■• befI»T'"™^"" ^**°"* "°'""'°*'' "*■'"'' '"'™ '" he P»id and provided for in fdl 
•■ ^Irhold Pt""^"°? Po'ieyhoMe" of a life office n»eive any bonuses, or the 
•■ Wt^c thTtlt P""'"«""y.T'»''^ -eive any dividends. A^roximat^ly four- 
■• fmuch it J° TT '" '""" P*"'"'"'« '- P~«"' »■«' "•« policyholder, pay 

•• undrr thi f . ""°" T /*" "'"° " "'""^ "" """-B 'heVeJ obligation! 

und«, he pohc.es. In good companies this extra premium paid for the right to 

«ce.ve bonuses ,s a particuUrly good investment. Among other thing, fn the 

■■ Z^' r^. ", f "'" '"• Pol-yholders to a share ff the ^^Z 1 

" holTe^ '.1 ;r 1 '"' "' '"""'"'"• ""•• *"• '■•PPy -"" 'hat the poUcy- 

•■ ^uXrtheL" "■"!""'"'\"-' 'he annuitanu are provided with addMonL 

secunty by the extra premiums paid for the right to share in the profits. 

" bv aU th-Tvt?^ "'i'' "^'""°" "'""' """'"'^ *» 'he Board of THde in 19M 
. ■• fltin;,^"!:-" °''°'' '"""««°« '"""'^ »"-- <" «y -.^tudegive, th. 



"Class of Office. 



•• English and Scottish 
" Colonial 

"British ... 



Amounts. 



Annuities 
Paid. 



2,387,686 
251,237 



2,638,923 



Surplus. 

£ 
7,391,676 
1,223,932 



Pereentages. 



Annuities 
Pftid. 



Surplus. 



8,615,507 



100 
100 

100 



310 

487 

326 



II 



II 



II 



.. ^; ">■'"■"«» P»id in a valuation period, whether one year or five. .« compa«d with 

secunties. The pomt to notice is that the profits are three time, as much a. the 
annm ty payments. The profits must disappear before there can be any loss " he 
annuitants whose contracts are more than provided for by the annuity LI 

The ultimate abihty to pay annuities depends upon the value of the asset. M,d 
m these days the possibiUty of dep«ciation of securities has to be taken into ^uM 
but even so there .s no conceivable possibility of such a state of thing. JHouU 
.mpair the abdity of a good life office to meet its liabiUties to annuitantf ^ lo" 
3 ^eP--t.on however serious it might be. would continue for a comp^IiS 
short penod only, but the source, of surplus, which constitute the margin foH^urit 

• to edt;r """--"""y -»-" 'hemselves in due course' uJZl 
o exaggerate the secunty afforded for policies of Ufe assurance but in «,v^^ 

" zr: rr: '\T't'" '""""'■"^ '» -^^ «-"<"■ ^"' '^"«^S 

greater than the secunty for bonuses, which, even in the« trying time, have been 
earned by the majority of offices, and will certainly be eamed and pai^n tt fut^ 

.. tLr^ '. f "°'"'""-. '" """' ""^"^ "•« """"y '« •»■"""« i» even gZn 
than that for non-participating poUcies. greater 

.. ,., " T" .u'™ ^"^^ "'"' "™ ""hal looseness of degrees of security mewiimr 
thereby the extent of the margin in excess of compler^urity. t'lpp^^ 



ARTICLE ON ANNUITIES FROM THE " ECONOMIST, 



» 



249 



It 
II 

41 
(I 
II 



annuities the security must he considei^ed absolute in the case of the majority of 
British offices: some have a larger surplus of security than others, but in many 
offices the security is so complete that it would not be imperilled even if we lost the 
war and experienced overwhelming financial catastrophe in consequence. Even in 
such circumstances, if they could conceivably bring about temporary technical 
insolvency, recovery would be certain, because of the deferred dates of payment and 
the large annual surplus which normally exists, and which should be available for 
reinstating the reserves even if the impossible happened and they became temporarily 
deficient. 

" Consider the subject how we may, and take what pessimistic views we choose, 
the fact remains that there is no form of investment, and in the nature of things 
there can be none, which provides such complete security and so large a measure of 
safety as is afforded by an annuity in an established life office selected with 
reasonable care." 




■ 



i • 



I 



^*^ ■ A*»PKNDICE8. 

APPENDIX XIII. 

MEMOEANDUM BY THE SUB-COMMITTEE (MAJORITY) ON EARLY 
RETIREMENTS THROUGH DISABLEMENT, AND THE COST OP 
THE DISABLEMENT PENSIONS; WITH NOTES ON THE PROPOSED 
CENTRAL BODY. 

m 

^ 1. It will be remembered that in the ease of the New Zealand Government Funds 
{see pars. 207 to 215) we found the average annual rate of disablement to be about 
2 per 1,000 of the membership. Applied to a salary list of £300.000, this ratio would 
represent an annual grant of disablement pensions of £600 per annum. We also noted 
{see par. 215) that disablement pensions are voided by death at a much higher rate than 
normal pensions. 

2. The evidence of any particular fund is, however, of little use in this matter, as 
circumstances differ in different services. To illustrate this point we give an extract from 
oertam Tables submitted by the late Sir G. F. Hardy, F.I.A., to Lord Southwark's 
Committee. The following Table shows for a certain uniform number of entrants (10.000) 
at age 20. how many may be expected to break down in health before age 60 according to 
the experience of the diflferent Railway Funds. To these results we have added, reduced to 
a similar basis for purposes of comparison, some other experiences that have come before 
us in the preparation of this report : — 

NUMBERS OF EARLY RETIREMENTS THROUGH DISABLEMENT 

ACCORDING TO THE EXPERIENCE OF DIFFERENT FUNDS. 

(All based on a c ommon radix of 10,000 entering at age 20.) 



MEMORANDUM ON DISABIJIMENT PENSIONS. 



251 



Age. 


G.N. 

Ry. 

1903. 


Mid. 

Ry. 

1905. 


N.E. 
1904. 


L.AN.W. 

By. 

1893. 


Mr. 

Manly. 

1901. 

« 


Mr. 
King. 
1905. 

« 


Ry. Clear- 

ing Fund. 

1898. 


Oal. 
Ry. 

1897. 


L.B.A8.C. 
Ry. 

1897. 


Mr. 
McLauohlan. 


20-29 


— 


3 




26 


3 


17 


— 




.-..M 


_ 


30-39 


55 


55 


29 


110 


45 


53 


66 


■»,— 


i^w 


_ 


40-49 


155 


169 


103 


208 


127 


96 


118 




^— 


_ 


50-59 


854 


624 


484 


430 


429 


471 


204 


227 


394 


129 


Total 

before 

60 


1064 


851 

1 

1 


616 


774 


604 


637 


378 


227 


394 


199 


Age. 


Elem 
School 
Defd.An 


entary 
Teachers 
ny. Fund 


! 1 

New Zealand New Zealand 
Railway. Teachers, 


New Zealand 

Public 

Service. 


Mr. Tinner. 

• 




Males. 


Females 


. Ist Divn. 


2nd Divn. 


Males. Females. 


Males. 


Females. 


Males. 


Females. 


20-29 




— 


— 


1 
1 

t 


— 


49 


__ 


73 


71 


30-39 


47 


146 


30 


18 


76 


66 


80 


27 


140 


86 


40-49 


166 


635 


98 


52 


162 


410 


98 


111 


236 


118 


50-59 


819 


1695 


932 


447 


859 


1556 


465 


386 


788 


307 


Total 

before 

60 


1032 


2376 


1060 


517 


1 
1 

t 


10 


97 


20. 


32 


692 




62. 


3 


1236 




681 



• V V ^T '^***^ ''®'^ **'*^ **° data to which the respective authors had access Mr Kinir'. T»M- 
!n Sr^ *L kP'T"' f^J" ^^»y ^'«*"°8 System FundExperience («e W.^Q.^J^) J^d ^*S 
m that case be based on later and more complete data than the Railway Clearing Fund TabteauotS ^Th« 

^^\v^:ss^YSi:^^£u^'''' " ""' ^" -*^^^ *^« ^»^'="^*^°°' - coLectfoJtitk^'jr.^ijeS: 

Nora.-The first 10 columns of this Table an> extzacted horn the late Sir O. F. Hardy's Talnable analysis 



8. The foregoing Table shows that, even if we eliminate females, whose rate of 
retirement is subject to different laws, and one or two Funds, such as Mr. McLauchlan's 
and the New Zealand Funds, as being probably affected by special circumstances, the 
numbers of early retirements still present considerable differences in different funds. In 
the first decennium of service the numbers in most funds are insignificant ; at ages 30 to 39, 
the extremes range from 29 to 140 ; and at ages 40 to 49, the range is from 96 to 235. Ik 
is only at ages 50 to 59, when the normal pension age is approaching, that the numbers 
rise considerably, and here they range from 200 or 300 to over 800. Disregarding the 
extremes, the number of tlie 10,000 entrants who wiU break down before age 60 may be put 
at from 600 to 1,000, of whom the groat majority wiU work till over 50. The experience of 
Mr. Tinner's Table is throughout very unfavourable. According to this, 1,236 cases 
of disablement may be expected to occur before 60, and unless this heavy rate of 
incapacitation can be accounted for by some special circumstances affecting that particular 
Table it cannot be ignored. 

4. Of the financial results of the retirements the foregoing analysis tells us little. 
Sir George Hardy proceeded, however, to use the statistics of the different funds for 
constructing what are known as " model funds," based on the assumption of as many new 
entrants annually in each case as would, after giving effect to individual rates of with- 
drawal, etc., leave 1,000 still in service at age 60. This particular assumption was adopted 
as a basis of further investigations which are too technical to concern us here ; but as a 
preliminary result it was found that when such funds had been in existence long enough to 
reach a stable condition (t.«., about 70 or 80 years) the relative results of the different 
experiences might be expressed as shown in the following Table. We lay stress on the 
word relative, as the method adopted in no way rests on a forecast of the concrete progress 
of any particular fund : — 





Annual 
Salaries. 


Benefits payable annually. 


Percentage of 




Experience nsed. 


Returns on 

Death or 

Withdrawal. 


Pensions 

resulting 

from 

retirements 

before 60. 


Total 
Pensions. 


Col. (3) 

on 
Col. (2) 


Col. (5) 
on 1 
Col. (2) 1 

1 


C61s.(3) + (5) 
on 
Col. (2) 1 


Col. (4) 

on 
Col. (5) 


(1) 
G. N. Railway 


8,454,904 


(3) 

£ 

90,911 


187.144 


1,079.382 


(6) 1 
10 

1 


(7) 

1 

12-8 


(8) 1 

13-8 


17-3 


Mid. „ 


8,231.179 


75.219 . 


150,440 


1,055.220 


•9 


12-8 


137 


14-9 


N.E 


8,660,145 


116.281 


137,187 


1,111,345 


1-3 


12-8 


141 ' 


12-3 


L.&N.W 


9,736,506 


121,372 


230,171 


1,263.675 


1-2 


130 


14-2 


18-2 


Mr. Manly 


9,782,709 


158,031 


195,949 


1.219.271 


1-6 12-5 


141 


16-1 


Mr. King 


10.334,749 


152,651 


250,617 


1,313.951 


1-5 


12-7 


14-2 


190 


Rally. Clearing Fund 


9.936,796 


157,716 


154,701 


1,279,234 


1-6 


12-8 


14-4 


12H) 


Caledonian Bailway 


9,258,661 


151,175 


87,795 


1.194.193 


1-6 12-9 

i 


14.5 


7-4 


L.B.&S.C. „ 


9,894,720 


156.497 


162,814 


1.239.612 


1-6 


12-5 


141 


lS-1 


Mr. McLauchlan ... 


11,796.764 


192.789 


116,467 


1,635.834 


1-6 


13-9 


15-5 

1 


7-1 



letmHniudfrom of the different funds prepared for Lord Southwark's Committee. The Tables were arranged m 
preeeiUHii jxme). order of the total number of pensioners commencing with the greatest, and the pensions arising 
before GO are seen to be nearly in the same order. The original Tables show that the withdrawals 
from service are almost exactly in inverse order, being least numerous in the G.N. Railway, and 
exceptionally numerous in Mr. McLauchlan's Table. The remaining columns, added for 
comparison, are based upon experiences that have come before us in the preparation of this 
Report. This Table may be read thus : Assuming a certain 10,000 clerks to enter the service of 
the L. & N.\Y. Railway at age 20, then, according to the conditions found to prevail m that 
service, the number of tkat 10,000 who would subsequently be retired from disablement would be 
' 110 from ages 30 to 39, 208 from ages 40 to 49, and so on ; the total number breakmg down before 
attainment of age 60 being 774. 



-" - 



252 



APPENDICES. 



i 






in. J', ?" '^ '""""'''" °' <«»»blement. »ome o< the general results of this 

^^ri^ ,%"■ " "*'* °' '"^ '"""• »» " """"y "«" -■'"''' "«ive. a total 
™r ^ 1 r,""'- ""'"°"' """ * P«' ""*■ I-'O'"' «» investment.. On death 

half only to be returned. These are the benefits shown in col. (3) of the Table. The scale of 

^Z' rr,t rr' """°™ *•"' "^ '- '■^'^ -« »-» « -» found bvdz^ t 

o^^thf ' ^ k1° " ''"'' °' '^"""•"™ •"" «'"»«y* As a fact the «»les worked 
out on the average at about •■ fifty-fiftha" of the average «>lary for each year of service the 
v^a^ons on e-ther side l«ing in most eases not large. Bearing these asLpZsTmind 

r^th^ d 2; ,1""" ''""' ''°" '"""' » P"P°'«'"' <" ">» "hole is the cost of the 
death and withdrawal benefits, and how the bulk of the money goes in pensions a! 
n^^s the lati^r col. (7) gives the percentage of the cur^nt Lfries whlTh Zd be 
needed to provide them m arrear. This column is very interesting as showing that in any such 
pension tund^adjustmg its scale of pensions so as to keep solvent, the pension payment* 
w,ll always he about 12J to 13 per cent, of the current salaries, and the toUl hene«sTC 
U per «,nt as cornered with the 6 per cent, necessanr to provide them in advance. This 
IS notw.thstandmg the considerable variations alrea,ly seen to exist in the different funds as 
regards the numbers of e«rly disablements and withdrawals. Sir George Hardy's 

^1"!!°^^ '"'?1 "■■• "'°'^'' """""' <"* •»'• 2««) "-at about 60 per It. should 
be added to the cost of pensions ba«d on average salaries to pass to final salaries. This 

tIttM ^ «TrI^: "' "*'■ '"^ "^ """' ^ " 21 ^ ~'"- ""J '"e cost in arrear of 
he total benefits of coL (8) to 22 or 23 per cent., as compared with 8 per cent, of the 

salanes^hich would be suflicient if paid in advance. It wiU be seen that these figures 
have a beanng on the various estimates we encountered in the earlier stages of our enquiry 
{ue more parfcubrly pars. 54. 160 and 180) as to the cost of paying pension, on the Cwi 
Service scale m arreftr. «r ^ o r 



Wbtl*^ ?^^•''u "'"""""*•'' °''J"' '■• K*"-* "■* last Table, viz.. to throw 
ti?. K, °! °''':»'''«"*°'- " « »«on "■»» "e state in col. (9) the pereentage which 
U^e disablement pensions form of the total pensions. UnUke the preceding columns, which 
run with remarkable regubrity, these percentages vary considerably and it wiU be seen, on 
reference to the earher Table in p«r 2. that they do not vary ««K>rding to the number of 
early retirements in the different Funds when the experiences are arranged in the form 

Sr^^»"TT*T, ^i"". *"""" ''*'"*'■ ^" '■""""*■ «'• J^'' '""-J- "hioh 
Sir George Hardy behoved to represent the Railway Clearing System Fund's later 

expenence. and which shows the highest proportion of cost (19 per cent, of the total 
^^!Z r '""^h in magnitude as regards the number of disablementsper 10.000 entrants ; 
white the Great Northern KaUway Fund, which is highest in respect of *e latter, is thir^ 
in order of proportional cost of disablement pensions. 

hetwiredlSre^i""/"" "r*"""^ " "'""'y "■" «"»' ^"^"'-^ "-at exist, 
ta^ween the differen Funds as regards the number of withdrawals from service. In other 

Trela't Inlfb "■^""of the cost of disablement exist, at all. it must be sought more 
nZ^Zl T ' 'r™** " ■"" ■"»"' *" P*"'-" "SO «>an in relation to 

the i^r^r 7.^ f T'T " "" ■" '"^'^ «"■"'"'"«' 'ho ^""Wng element of 
of thltf "t : ^" T'^" ^"^y <*« !»'• *) "•d rearranged the Service Table, 
of the RaUway Funds quoted in the flret ten columns of the earlier Table, so as to show in 
«.hca^ the number of retirements before age 60 for ^ery 1.000 Ml r«naining .„ Z 
.«vu^ at lh,prec,se age 60. Frem hi, results so arrived at we give thT pre.60 
oTrrtT "'V"^ '''""* " ""o '»"° »' !«-■"»«-• These are stated in'^^!^ 
onr last Table are placed beside them for compariwn :— 



C4. ^p. m'*"'°" " ^^"^ » Ml in U» Vdmn. of E,id«.e. of Lord 8outhw„k'. Committo.^ 



MEMORANOUM UN DISABLEMENT PENSIONS. 



BsiiATiOM or Disablements to Existing Staffs at Aob 60. 



253 





Disablement Pensions stated as a percentage of 


Fund. 


(i) the existing staff 

at age 60. 

(Numbers.) 


(ii) the total pensions 

as provided in arrear. 

(Amounts.) 


Col. 3 ^ Ckd. a. 


(1) 
Mr. King 


(2) 

310 per cent. 


(3) 
19-0 per cent. 


•61 


L. & N.W. RaUway 


29-6 


18-2 „ 


•61 


G.N. Railway 


28-9 „ 


17-3 „ 


•60 


Mr. Manly 


24-8 ., 


161 .. 


•65 


Midland Railway 


22-9 


U-2 


•62 


L.B. & S.C. RaUway 


19-8 „ 


131 .. 


•66 


RaUway Clearing Fund ... 


18-2 „ 


12-0 „ 


•66 


N.E. Railway 


181 .. 


12-3 „ 


•68 


Caledonian RaUway 


10-2 „ 


7-4 „ 


•73 


Mr. McLauchlan 


10-2 „ 


71 „ 


•70 



8. It wiU be seen that the percentage of total pensions represented by the disable- 
ment pensions follows with remarkable closeness the variations in the number of early 
retirements in the first column. The foUowing rough conclusions appear to be justified: 
first, that according to the experience of RaUway Funds, and where pensions are based on 
salary, the amount of disablement pensions wiU work out at from 12 to 19 per cent, of the 
total pensions ; and secondly, that the experience of any other class of the community can 
be applied usefully to elucidate the same question if it can be arranged simUarly to show the 
number of pre-60 retirements per cent, of the number existing in a service table at age 60. 
In fact, from 60 to 70 per cent, of this last ratio, or say 65 per cent, for an average fund. 
wiU represent the ultimate proportion of the disablement pensions. 

9. Applying the latter conclusion to Mr. Tinner's experience, which we have abready 
noted {see par. 3) as showing a large proportion of early retirements, it is found that the 
number of pi-e-60 pensions per cent, in service at age 60 works out at 35-7. This number 
is considerably in excess of that shown by any of the Railway Funds ; and if the relation 
found in the last paragraph to exist in the case of the latter is to be depended on, it would 
suggest that in this case the cost in arrear of similar disablement pensions would in a state 
of equilibrium work out at something like 21 per cent, of the total pensions. Applying a 
similar test to the Elementary School Teachers' Table, it is found that the number oC 
pre-60 pensions works out at only 112 per cent. This figure, according to the Table in 
par. 7, would suggest a cost in arrear for the disablement pensions of about 8 per cent, 
of the whole. On the other hand the most recent railway experience which has come 
before us showed that the disablement pensions would work out, on similar assumptions, 
at about 14 per cent, of the total pensions, thus agreeing with the central figures of 
Sir George Hardy's Tables rather than with those showing the highest ratio of cost. 

10. In order to use these results as an index of the cost provided in advance oC 
disablement pensions it is necessary to assume that the latter would vary as the cost 
provided in arrear. This {see Report, par. 440) may probably result in understating it ; 
but for the moment assummg the relation to hold, it is seen from Sir George Hardy's 
Tables, taking the mean of aU his results, that the cost in advance for pensions of about 
" fifty-fifths " of the average salary would be about 16s. per cent, of the annual salaries, 
whei-eas according to Mr. Tinner's Table the cost under similar conditions would be 
2l8. per cent., and according to the Elementary Teachers' Table used by Mr. CoUins 8s. pec 



. m 



|! 



2o4 



APPENDICES. 



imances generaUy This i8 what actuaries term the profit from withdrawals It w J 

Harfv'. T!^r">'' "«' '"■"Prison with the estimated cost of 16s. obt«ned f™m Sir George 

Ifi ^ tT'' .^ ^"'""^ "'"'"'" "•« ''"«' »«" '«'"» a position midway bTt^ 
^e other two. wh,ch g,ve a mean cost of 21s. per cent. In the Z pl«« it i. nZZ 

iTt^ I M r""'" "" """" ^" ^^'^^ Harfy asamated t! Z st.^dTZ 

~lopted by Messrs. T.„ner and Collins. His pensions worked out on the avei^e^a^t 

!:™ii^rth7ad^ ::7hrprrst""rj 'r "-' •>-^'« '-"'- <" 

*o„M on the average e,ee«. the'Sr^re IT^.1^^:: r^^lTj'! 
very greatly. Increasing, therefore, the 16s. got in par 10 in a Lht 1^ ! 

th.t I. I^r ^ l'^' r "" ''° "*"'" "' measuring these f«,tors. but it would seem 

Of Messrs. TiLer JcomrJy^ZT''' TT "" *f/^°-°« 'h»' the estimates 
tested i. the mass; (n) tCconZl' '^^'^'"^^7' ^^ P-»-»>»y »^old good when 
Tinner and C^mnsi dut^h'd^^^^ te difference between Messrs. 

(lU) they point to a lar«e ^v oT^r ^^»>^«°^«°^ »° ^^e Tables used by them ; 

y J y pomt to a large body of Kailway experience as occupying in this respect a 



MEMORANDUM ON DISABLEMENT PENSIONS. 



255 



position about midway between those Tables ; (iv) they suggest that we have wot 
exaggerated the probable profit from withdrawals ; and (v) they show that in adopting the 
actuaries' suggestion of 30s. per cent, we have allowed for a maximum disablement rate, 
the highest, at any rate, that has come before us in the form of a standard Table m the 
course of our enquiry, and one considerably higher than is shown in the latest of the 
Hallway experiences {see par. 9). 

15. In the following Table the cost of the proposed standard disablement pensions is 
shown in the case of Hospital Type Case No. 1 by the New South Wales experience. These 
results were calculated from the statistics of the Departmental Ck)mmittee, referred to in 
par. 303 of our Report, by Mr. W. R. Strong, F.I.A., who has communicated them 
to us. There are two divisions of the employees of the New South Wales Government, 
viz. (i) a division roughly representing the Weekly Wage Staffs, and (ii) a division 
representing the Salaried Staffs. Interest is taken at 3^ per cent:— 

Cost of Disablement in Type Case No. L 

Age 24 next birthday at entry. 



Basis. 



I. — ^New Appointment. 



Percentage of salary. 



II.— Existing Officer. (Future Service-J 



Percentage of future salary where past service 



10 years 



20 years 



30 years 



N.S. Wales Weekly Wage 

Staffs ... 
N.S. Wales Salaried 

Staffs ... 
Elementary School 

Teachers (Mr. Collins) 



1-62 per cent. 
1-72 „ 



•86 



1*73 per cent. 
1-78 

•85 



•» 



1-65 per cent. 
1-67 „ 
•74 „ 



1-25 per ooii. 
1-20 .. 
•47 .. 



III.— Existing Officer. (Past Service.) 



Additional percentage of future salary where ; Lump sum where the 
the past service is j past service is 



N.S. Wales Weekly Wage 

Staffs ... 
N.S. Wales Salaried 

Staffs ... ... ..... 

Elementary School 

Teachers (Mr. Collins) 



10 years 



20 years 



30 years I lOyrs ; aOyrs 



aOyrs 



•47 per cent. 
•48 „ 
•23 .. 



2-23 per cent. 
2-25 „ 
104 „ 



9-16 per cent 
9-19 .. 
3-8 .. 



£ 
34 


L 


37 


149 


19 


72 



288 
290 
120 



It may be noted that the rates of invalidity are identical in the two divisions, while the 
rates of withdrawal are naturally heavier in the weekly wage division. It is curious thai 
while the rate of withdrawal in the weekly wage division, is nearly double the rate in the 
salaried division, the difference in the resulting cost of disablement shown as a percentage 
of the salary is very small. In this experience, however, the rates of withdrawal in both 
divisions are relatively low, especially at ages over 30. These i-esults suggest that the 
effect of withdrawals in reducing the net cost may easily be exaggerated. At the same 
time, in the case of the proposed central body (sc« par. 12), the withdrawal element 
must be worth something, and the general conclusion from these calculations seems to be 
that we are confirmed in putting the all-round cost of disablement in respect of future 
service at 1^ per cent, of the salaries. Mr. Strong's calculations also confirm Mr. CoUins's 
concliision (see par. 454 of Report) that the cost for the future service of an existing staff 
would not be greater than for new appointments. 



) 



256 



APPENDICES. 



PROPOSED CENTRAL BODY FOR DISABLEMENT : PROCEDURE. 



257 





% 

would be l^Zt Zt^^^Tt" "■"' """^ 'o ^"""■'- »"- "- <='-y ">«. 

In constitution it ll'^Zl^'^r^: iZ^^^^i:' '"t ""^ -"'»• '»^^- 
representatives. For fiw,ilitv „f T? '*""'""" Hospitals, who would act by elected 

supposed case wouU nL'drnulZ "t ' f"""* '"" '" ""'-''y <"'■""' "" "» 
register it as a limited .»Z.n"T ^ " "' """ranoe) it might be found desirable to 

b/th, HospitaU ns S. ' ""^rr"" "■""'"• °' """" "» "••"» """l" I- held 

s.' up in adCt the'e^raL"::^o^,rerrd'r "" T' r ''""*""■" '^"«''- '^ 
this from extraneous sources »„T !k ^ ? '"°"'^"« '"^ " '"•«''' »» P<»»iWeof 

private donors, to wX^''ort:rH5::i!LX'-- ^ -"" -'-rat. or 

once started but a good Ll om2T ^ ™'"°« «•"*"' principles when 

Mostofthequestion^ri^, 't^ri"°*'°:^"«.'''' '""'^ "«' 'y-P^'hetic handling. 

of reversionl su^s anT 2 ^ T.""^ "' ""' ''"""°'' *" "'•• <"> "" ^"^"^ 

funds or altemaTvr apriv^ th'' /?'"' "'"■ """"' "«> «■« '■'^"'■»»' "f sut^u. 
. , '"•°™»n"iy applymg them to finance the noliciea /i.,\ tk. .j- . f . 

financial relations with the individual Hospitals or/^!^- '^- ""• "f J""""" <>' 

disablement experience so as to test th« .7^ • ' J 1 ' ""pervision of the combined 
for futu«, caserThT^rk ^ol hi ' * ^"™'°" ^"^ '"'«'« '" •<»™°«' 

offices of Eeversionaryl^^Lrs'^n."""" 7" ^'""'""" '° """ '""-"«' » ">« 
outset the disablement p^tmZt w T~ ^'"'"°'*'- " " ■"" "^^ly «»' »' '"e 
time, even of a small st^ rt "ll U "'"I " ""''"■" """' *" »'«'"' "•• «'«"<' 
special Idnd. and the :^;ffllurol J*: "r'' ™" " """ ""^ "«"»'• 
. person familiar with such p^Uett'll'LTr^d'! '"""'^ '"'■^' " "' "^ "" 

trace1pplrt::;the fit:cLt::es?"f 1 '"^ ^""■'^'"' " "■ '"""'•"X' ■»-» 'o 
contempfated i. the Ke^ortZtr-^Tand l^^ ""'""' '^^^ " "" """• "' """•y 
on superannuation and^salrmerto the hT " """"""'^ "^ ""-l "•« '«" benefits 
service, were to be raised .^:,:, ,t I^i^ :::tl:!fZ 7r "' T, 
every apphcation for disablement pension hein„ 1^. iT , li . Prospect of 

but it would at the same time, brhZh^U ^ n all TT' '""' "" P"' "™«'' 

parents, and it would Cear.y'have s^us 'n^ f^Z^ 'Tt"' "^ °""' """■ 
made, as recommended in the R«n«rf k j- investment. If, however, a start be 

benefits in respect on^:" utu^^^:'''^'::'""«'" ^ '"""■""-'-y 'o purchase 
Suppose, for e^mp^'as s i^^lp!^^ ^ ';" t ""'/"' "T"' """" '«'"''«"°'- 
«mum graduaUy faUing to iwl.^ J f !, "•»~''' " '"""^ ""at fS.OOO per 

.scheme in full oZtiof The ^«KI . ™ •*'™'' ''"™ '" P"" * '''»'" ""at. for 

.6.mor.?'000ayearon°:Lts$t:'°rHro*^^aSr of°' rh"^-- " »'«-' 
than £600 or £700 would fall in everv veJ^ R . , . ' "''"''' P"'"P» »»' ■"»« 

of the disablement pensions for wWch Z f ', ^ "™*" "" """"'^ "•» P"'"''" 
less than this. Fori p^'n on '"1, """^ """'"' '""'««' ''"'^'^ '« »»<"• 

individual Hospital woulK^ i .0^^^^;''^^ '" ^^ " ^' »*"'» ""> 
only with such pensions as would eme' ~ fZT . ^'' '"'"''* commence 

from the initiation of the «hemr Wi W» "'""^'^'^ '° "^' °' «™« dating 
estimated to come in later v^hv , T °"^« "^ *"'"""'" '« "» ""ef 

actual outgoings ^im^r:^^^'^^'^^!:''''::'^''''"''^' "• 

find itseU with surplus funds to i„.L^ . ^ " """'^ """' '""» ""e outset 

extraneous source ^from Zde^ ^ '" ."T' "' '""'""^ '""'"»' ^ '^^ -y 
mitigation of the annu'^litlTLrrnlhe^^Cr' " """" ""'^ 'o '-^- '" 

.b.e i.^vr-in^rrnXf":- tit : morruT^"''''"' r^' *" - ~'""^- 

oi a mnd is a more diflicult and complex question than is 



commonly supposed. Even the best life insurance companies, imder the advice of scientific 
actuaries, and professing to devote special attention to this question, have been caught in 
the grip of the financial conditions now ruling, and have had to write ofiF large sums out of 
profits to make good the depreciation. It is now seen that permanent securities bearing a 
fixed interest, hitherto generally regarded as affording the highest security, are in realitj-. 
owing to their fluctuating value in the market, highly speculative from the point of view of 
conservation of capital. Fixed mortgages and short debenture bonds, often regarded with 
suspicion owing to the liability of the interest to fluctuate, are the reverse of speculative 
as r^ards conservation of capital. It would thus be a good thing if the central body, 
conducting what would be virtually a co-operative investment on behalf of the Hospitals 
at a minimum of expense, had at its disposal advice from the school of those accustomed 
to take long views. Indeed after the war the chief securities for Trustees will be for many 
years to come national loans of enormous amount which will be repayable by fixed dates, 
and perhaps non-state securities created in the future may tend to conform to the national 
type. Thus persons or bodies who in future have to prescribe rules for the investment of 
trust funds will be led naturally to consider the question whether it would be possible and 
desirable to restrict investments to such as guarantee a return of capital intact. 



20. It is suggested in the Report (see par. 437) that the proposed central body, in 
order to provide in advance for future disablement, would proceed to make a " uniform or 
general " levy on the Hospitals for such proportion of the annual provision as it could not 
itself set up. From the point of view of any Hospital there will thus arise two 
questions of interest, apart from that of total cost, viz. : (i) on what principles 
should the part of the cost to fall on the Hospitals be levied ? and (ii) what is likely to be 
its own share of the contribution? The answers will obviously depend on the amount 
of support from extraneous sources that the central body would receive. Assuming 
that efforts be concentrated on including the existing staffs in respect of all future 
service, we have already spoken of a total cost of £5,000 per annum to commence 
with, falling gradually to something like £2,000 per annum. This suggests that 
any financial help which the central funds or other donors might be disposed 
to give the Hospitals for this special purpose might usefuUy be given in the early 
years of the scheme. It is then not only that the cost will be greatest, but that 
the strain on the Hospitals of passiilg, in respect of ordinary superannuation as well 
as disablement, from a system of provision in arrear to provision in advance will be 
heaviest. Supposing, therefore, that the cost to fall on the Hospitals were no more than 
the sum of £2,000 or thereabouts estimated to be needed when the system of insurance 
policies should be in full working order and covering the whole staffs, in what way should 
this be levied on the Hospitab ? It would probably be found to be sufl&ciently equitable 
to apply the ordinary principle of insurance, and to spread the average cost over all 
Hospitals by levying the charge as a uniform percentage of the salaries and emoluments. 
On a salary list of £300,000 the supposed charge would work out at two-thirds of 
one per cent., and it might be as low as one-half per cent. Thus a Hospital with a 
pensionable salary list of £10,000 would be called on to pay from the outset about £50 
or £70 per annum for disablement in respect of future service. It would be found in 
practice, of course, that many of the lives, either through advancing age or failing health, 
would not be eligible for insurance policies. The central body would hope to provide for 
the additional cost of such cases from extraneous sources, but if it should not receive 
sufficient support to deal with the temporary and reducible extra cost of £3,000 or so for 
the existing staffs in respect of future service, a greater amount would fall on the Hospitals, 
and it might be necessary to devise a method of levying the charge that would take some 
account of the state of the existing staffs. 

21. Though it will be clear from the foregoing remarks that it is difficult to forecast 
the exact working out of the suggested proposals in practice, it may be useful to cart}- 
the attempted process one step further and, from the point of view of financial soundness, 
summarize the considerations which may be regarded as the foundations on which the 
scheme rests, and the margins of strength that are allowed for. In the first place, it is fairly 






J ' 



ox 



58 



APPENDICES. 



h"e^°TJ u'r '^Z^"Tr "«' «»"'" P^ "' ""• ■^PP«'»<'« """ th, actuaries who 
wh™h aZ'/a '"'™r""""«' ""> «»' - "l™-^ o' 'he disablement pensions at a fig««, 
S o* Zl ""•'" '" "»"""«--- By -JoP'ing « . guide the ^t 

llr^lZ, "■ ^" ">* "'=°'"' f^- ""« Uni™«Hies system, on which 

on6?w^»r"°" Z*" *" «"'"^- "^^ ^"""^ '«''«'«'» "hich aveage ahout 
which the o r, C^"^-, '" """" """'''■ "'»'" """■'■'^ <" '"« P^vision by means of 

thSh^ lut « :7 u " °""'"^' °' ' ^- "'■' " ■"" »»«»ifi«»nt part, of 
pLmc obi ' "^U-^tahhshed fact that the mere existence of an organization for a 

TsuD^rt ^ T''7r '"^'"'* *"■" """" """ "PP"™ '"o ""J"'- Better evidence 

cVtJTHosl , V T^tu """" ""' •" P™'""* "«"> ""• »"««-» °' 'he great 
Ceofaal Hosp tal Funds. The spectacle of the Hospitals themselves combining for 

service generally, ,9 well adapted to eUcit support. In the last place the nton^Js 
.^. as at present, on the Hospitals themselves. The proposed central body wiU be 

Z^Ument^beTefiU T''^^ "'!!"' ^"-'"■' '" "» '"^ <" admintfitir^th^ 
msablement benefits and spreadmg the reduced ultimate cost rateably so far as this m.v 

<ottrair:h'r°™' ''; ''""' '^'- " ^-^ *^ '»"- f- trd coiitro 

'hat although m our endeavours to forecast the operations of the proposed central body 
we may have spoken of its " liabiUties " and of the necessity under Thich U wm w^t 

1J7Z7Z TIT" "^"^ '"'"'^" "- '-^'' -■> hyPO'he'iO liabiUtl, 
central body w.ll not be m any way in the position of a mutual pension fmid t^ the 
solvency of wh.ch the individual members would look for the integri^ of therllns 
and („) that m accepting the ultimate responsibiUty for keeping the cenL^Z i^ 
a state of actuarial solvency, the Hospitals on .the.r side cannft IZ^ZZ 

ou»1iL wT^ "^^ "'.'" "" "'*" •»"«''''""»«« summarized in th. last paragraph a« 

reptselt^'bv 1:""""":°. "f "' ^""°"' '° *" P"""-^ °" disahlemenrS^Th:^ 
lepresented by the somewhat arbitrary scale adopted for purposes of iUustration in par m 

of the Eepor^. We adopted that scale for our own use as the suggestion of an ^ul 
havng considerable experience of disablement questions, but there would be no"brIr„ 

ZlT. ^' """ '°"°^ '" ^ e«^We. We doubt whether a scale th«t 

r„f M ^"ir °" ""' "'""''«•' '"'P""''"*'^ »"■»"- *■"• - have suggested IL^ fold 
suitable for the purpose; but, for actuarial reasons which need ni^ detain There Ti 
suggested scale bas«l on Mr. Tinner's methods might prove difficult! htdlel pi^tit 
and we quite contemplate that one of the first .Juties of the central body woulTtt: 
mv^tigate this question in order to .commend a scale of henefite which would b:!^^: 
from the technical point of view, and also be considered safe in the Ught of VuchUter 
mformation as might then be available. Amongst other points te be weighed ZZdZ 
^nsuleration hat the «=ale should not be such as would provide any positiveTducem»t 
te retire. In the case of the EaUway Clearing System Fund, in the Linage ofTneTth. 

the heading of incapacity were "dumped" on the Fund. In the ci,cumst.ncro7thI 

proccM that appears to exist in the case of a Superannuation Fund ; for W dch 
Hospital would be a constituent member of the associated body, and 7niumX 
feel an obbgation to use it only in a legitimate way. «.d ^ i, ! ^, 



PROPOSED CENTRAL BODY FOR DISABLEMENT : SAFEGUARDS. 



259 



rule of conduct existed, and succeeded in influencing' the flow of retirements, the financial 
result would quickly come home in the shape of increased levies. This point is iUustrat^l 
clearly in par. 237 of our main Report. If the levies remained moderate it seems not 
undesirable that the Hospitals should have the choice of taxing themselves, Nvithin 
such limits as would be consistent with the fairness of a uniform levy, to produce 
efficiency. If, on the other hand, the levies became excessive, the remedies before the 
Hospitals would be (i) to insist on a more severe standard, or (ii) to make increased efforts 
for extraneous support, or (iii) in the final resource to reduce the scale of benefits. The 
important thing, from the point of view of the ability of the centml body to forecast its 
expenditure and preserve an actuarial balance, would seem to be that the standard of what 
constitutes disablement should be carefully fixed and consistently adhered to. so that the 
law of average may have fair scope to work. The central body ought thus to be made 
sufficiently strong to maintain proper standards and rules. When, as will be inevitable, 
there are boi-der line cases as regards health, or questions involving general policv. a 
possible solution might be to give the central body discretionary power to enter into partial 
commitments in individual cases, leaving anything further to be arranged by the individual 
Hospital concerned. 

23. The reasoning of par. 21 suggests that, as a matter of procedure, each 
disablement question should be settled with the individual member by the Hospital 
concerned. Although the latter would need in any particular case to secure the consent of 
the central body, so that a uniform standard of medical elimination might be appUed to all, 
and possibly for other reasons {see par. 460), it would no doubt be desirable that it should 
itself pay all pensions, arrange for all contributions, and settle up periodically any balance 
of the account with the central body. This conception of the relations existing between 
the Hospitals and the central body points in turn to a possible further development. For 
a good many years to come the cases of disablement will arise very largely among the 
older members of the present existing staffs, in regard to a great part of the past 
service of whom the central body would have no cognizance and make no provision. 
For the reward of all past service the Hospital will, pending a complete solution 
of the problem of the existing staffs, remain liable as at present.* If, therefore, the central 
body should be able, as time goes on, to carry out the programme roughly indicated 
in par. 20, and then find itself with surplus resources, the question would arise whether 
these should be applied to reduce the more or less permanent levy for future disablement, 
be it 10s. per cent, of the salaries or whatever rate it may settle down to, or whether the 
money could not be applied better in helping the Hospitals to bridge over the interval 
during which they wiU remain liable on any retirement for so much of the past service as 
was rendered prior to the initiation of the scheme. In other words, the ultimate object of 
the central body might come to be regarded as being not only to arrange for disablement 
pensions pari passu with ordinary superannuation in respect of future service, which is its 
primary conception, but to provide machinery by which the Hospitals could pass wholly, so 
far at all events as disablement is concerned, from the system of providing in arrear, with all 
its attendant liability to derange the finances of the smaller Hospitals, to that of providing 
in advance. The cost of this would depend on the ages and " insurability " of the existing 



• To illustrate this point the foUowing Table is given, showing, in certain selected cases, the amotmtK 
of pension in respect of future service to which the purview of the central body would be limited:— 
ExiBTiNO Staffs :— Spkcimes Disablement Pkssions in bespect op Future Qebvice provided by 

THE PBOPOSED StaKDABO ScALE IN THE TVPE GaSES. 

[Deduced from the figures in App. VIII, Table VI.] 





Mqmber of Team PMt Serrioe at inoeption of Scheme. 


Team of Fntare SerTlee 


M n 


ai 


to date of breakdown. 


Tjrpe 

Caae 

No. I. 


Type Type Type 

Caae i Caae Case 

Mo.U. { No. in. No. I. 

1 


Type 

CaM 

No. n. 


Type 

Caae 

No. III. 


Type Type 

Caae Caae 

No. I. No. U. 

1 


Type 

Caar 

No. ni. 


f 

10 

' 16 

» 


£ 

88 

88 

135 

168 

196 


£ £ £ 
31 31 43 
«3 48 ; 81 
68 68 113 
87 83 
110 96 i 


£ 
31 
45 
69 


£ 
30 
39 
56 


£ 
33 


' £ 
23 


£ 
16 



8 



a 



I' 



260 



APPENDICES. 



staffs. It wiU be seen that this suggestion raises the qnestion whether the central body 
should have discretion, in disposing of surplus funds, to apply them in cases of individuals 
or of individual Hospitals or otherwise in such a way as would in its opinion best help the 
Hospitals in the general pursuit of efficiency. • 

24. The proposed central body, or " Central Board," or whatever it may be called, might 
thus in time become, if managed with knowledge and discretion, a body with very useful 
functions and exercising a certain amount of moral authority. It might, for example, 
undertake for the King's Fund the coUection and classification of the statistical information 
as to all Hospital staffs recommended in the main Report (see par. 118) ; and it might be 
one of the bodies authorized to exerpise the trusts we have contemplated in connection with 
the scheme for young Nurses (see par. 106 of Report). It might even organize an Approved 
Society to include all Hospital employees in one system of National Health Insurance. If, 
later on, it should be practicable to help the Hospitals to pass from the system of providing 
in arrear for past service to that of providing in advance, not only in respect of the 
cost of disablement but of the much heavier cost of superannuation generaUy, the services 
of some such organization would be needed to co-ordinate claims and guide distribution. 
FinaUy, the ejcistence of such an organization, especially if it possessed a corporate existence 
and skilled management, might suggest the possibility of its taking over the secretarial 
and purely ministerial part of managing the main superannuation scheme. The latter 
would depend, for the maintenance of its general principles, on the existence of 
some general representative council representing all interests; but when once an 
initial conference or council had organized the scheme such a body as we have 
contemplated, being in business relations with all the Hospitals but probably with 
insufficient work to occupy a smaU staff wholly, would be weU qualified to carry it on. 
Indeed the experience of the Universities System suggests the desirability of such work 
being done by officials having some acquaintance with insurance business. That system, 
soon after its initiation, was faced with a state of war which, while existing contracts were' 
unaffected by it, necessarily varied the terras on which new contracts could be effected. 
Where such unexpected events happen it would be not improbably an advantage to have a 
type of management which, while sufficiently expert; to know how to get maximum 
concessions for the members from the companies would at the same time understand the 
maximum limits to which the companies can go, and would thus help to preserve 
advantageous relations with the institutions upon whose soundness and success the whole 
scheme would in turn depend. 

25. If some of the preceding remarks appear to have little relation to the question of 
the cost of disablement, with which this Appendix is more partiiculariy concerned, they 
will at least serve, in conclusion, to remind us of the existence of the much larger problem 
of ordinary superannuation and of the need for keeping the minor question of disablement 
m proper perspective. It is for this reason, and to differentiate our suggestion of a central 
body, with theoretical •• liabilities " actuarially calculated, from the idea of an ordinary 
pension fund, that we have dwelt on the responsibUity of the Hospitals as constituting the 
essential foundation of our proposals, and on the moderate amount of the ultimate levy 
that will probably suffice to give effect to them. We have seen that, whereas a contribution 
from the Hospitals of 5 per cent, of the salaries is the minimum that wiU provide in 
advance for their share of the cost of ordinary superannuation, our estimates point to an 
ultimate levy for disablement pensions only of perhaps one-eighth and possibly only 
one-tenth of this amount. In other words, whereas in order to give effect to the proposals 
m the Report for ordinary superannuation in respect of future service the Hospitals as a 
whole would have to face an estimated total expenditure of about £15,000 per annum, the 
relative net cost of financing the central body for disablement would be more likely to 
settle down to £1,500 or £2.000. Any sum of this kind, when spread over the whole 
body, has been seen to represent a very smaU percentage of the annual salary bill. 
Viewed, therefore, with a sense of proportion and relatively to the total responsibilities 
of institutions whose ordinary expenditure increased in the single year 1916 by £104,540, 
with a furtiher increase in 1917 of £158,348, it appears that the liability of the Hospitab 
to contribute to the central body would be not only one of their own responsibilities in 
a mitigated form but in itself a liability of quite minor financial importance. 



INDEX. 



All FIOUBES, except those, which are printed after p. ipa{fe) or pp. (pages), refer to paraoraprs. 
Page Figubes in small type refer to pages in the Appendices. 

Figures in heavy type indicate either the. principal passages, bearing the heading in quettiom, 

or PASSAGES containing conclusions or recommendations. 

Absolute Scale Pensions — ses Pensions. 

Accounts, Revised Uniform System of — 6, 9, pp. 181 (5), 200. 

Ackland, Mr. T. G., F.I.A.— 171 (note), 176 (note). 178, 180, 205, 358, 363, pp. 221. 236. 

Acts op Parliament : — 

Assurance Companies' Act, 1909 (9 Edw. 7, ch. 49)— 397. 

Asylums Officers' Superannuation Act, 1909 (9 Edw. 7, cap. 48)— 164, pp. 181 (3), 200, 220. 

Children Act, 1908 (8 Edw. 7, cap. 67)— 279. 

Civil Service Superannuation Act, ia59 (22 Vic, cap. 26) \_u^ 15, 135-147. 337,378 pp. 181(3). 

I>o. do. 1909 (9 Edw. 7. cap. 10)1 200,236. S^-ra/w Civil Service. 

Elementary School Teachers' Superannuation Act, 1898 ^ 
(61 & 62 Vic. cap. 57) ( 

Elementary School Teachers' Superannuation Act, 1912 ( ^^^' P' **9• 
(2 A 3 Geo. 5. cap. 12) ) 

Finance Acts, 1915 (5 & 6 Geo. V., ch. 62) and 1916 (6 ik 7 Geo. V, ch. 24)— p. 237. 

King Edward's Hospital Fund for London Act, 1907 (7 Edw. 7, cap. Ixx.)— 480 (and note), 
p. 182 (12). r / V /. 

Life Assurance Companies' Act, 1870 (33 & 34 Vic, cap. 61)— 293, 413. 

Metropolitan Superannuation Allowances Act, 1866 (29 & 30 Vic, cap. 31)— 171, 176, 279, 281, 
p. 220. 

National Insurance Act (1 A 2 Geo. V., ch. 55)— 216, 278, 343, pp. 221. 260. 

Police Act, 1890 (53 & 54 Vic. cap. 45)— 157, 159. 

Police Superannuation Act, 1906 (6 Edw. 7, cap. 7)— 157. 

Police Superannuation Act, 1908 (8 Edw. 7. cap. 5)— 157. 

Poor Law Officers' Superannuation Act, 1896 (59 & 60 Vic, cap. 50)— 161. p. 220. 

— Special, obtained by Metropolitan Boroughs : — 

Bethnal Green Borough Council (Superannuation) Act, 1906 (6 Edw. 7, ch. 6)— 172, pp. 220, 221. 

Camberwell and other Metropolitan Borough Councils (Superannuation) Act, 1908 (inchidintf 
Deptford and Hackney) (8 Edw. 7, ch. xix.)— 172. 

Contribution of Employer under earlier Acts — 174. 

Do. do. Kensington Act — 175. 

1^0. do. Paddington and Poplar Acts — 175. 

(See also Pension Schemes— Cost of and Contributions to Pension and Annuity Funds.) 
Kensington Borough Council (Superannuation) Act. 1907 (7 Edw. 7, ch. xciv.)— 172, 175, pp. 220, 22 ■ . 
Paddington Borough Council (Superannuation and Pensions) Act. 1911 (1 A 2 Geo. V., ch. ci.)— 172, 175. 
Poplar Borough Council (Superannuation and Pensions) Act, 1911 (1 A 2 Geo. V., ch. cii.)- 172, 175. 
St. Marylebone Borougli Council (Superannuation) Act, 1908 (8 Edw. 7, ch. xxi.)— 172. 
Stepney Borough Council (Supemnn nation) Act, 1905 (5 Edw. 7, ch. xcvii.)— 172, pp. 220, 221. 
Wandsworth Borough Council (Superannuation) Act, 1909 (9 Edw. 7, ch. ix.)— 172. 
Westminster City Council (Superannuation and Pensions) Act, 1909 (9 Edw. 7, ch. lix.)— 172. 
Actuarial Calculations, Investigations, and Valuations— 4. 126, 128. 130, 159. 175, 196, 197, 217, 224 
231-248. 280, 305, 310, 353, 354, 372, 381, 386, 389, 407, 408, 410. 460, 462, 469, 471. 484. 
490, pp. 209, 216, 219, 225, 236. 237, 239, 248, 256. 
Actuaries, Institute of— 175, 176 (note), 203, 331, pp. 220, 221. 

^ Journal of the Institute of— 172 (note), 473 (note), p. 221. 

Admiralty— 147. 

Aggregation of Past Services — see Service, Principle of " Aggregation " of. 
S 2 



^SM 



262 



INDEX. 



Ijl 



t I 



J ii 



Annnities— 65, 70. 76. 78. 283, 286, 287, 296, 298, 301, 302, 389, 432, 459, 462, 477, pp. 181 (7), ai6, 
219, 234, 239, 248. 

Deferred— 253, 258, 263, 265, 266, 273, 280, 281, 319 (and note). 322, 337, 389. 416. 426, 426, 

443, 461, 462, 467, pp. 235, 236, 237, 243. 

on Deteriorated Lives — 442. See also Disablement. 

Male Lives. Cost of £52 per annum at age 60 in N.S.W. Scheme — 308. 

Female Lives. Do. do. do. — 306. 

Appendices, Befebbnces to : — 

II. — p. 205. 
IV. — p. 241. 

v.— 94 (note), 242, 243, 370, 383. 
VI.— 223. 386. 

VII.— 149 (note), 346, 354 (note). 

VIII.— 313, 317, 319 (note), 350, 363. 400. 446. 460, 482, p. 234. 
IX.— 260, 319 (note), 338, 364, 426, 441. 446, 448. 450, 454, 456, 467. 
X.— 317, 357, 362, 418, 430, pp. 231, 239, 241, 242, 243, 254. 
XI.— 292, 361. 
XII.— 413 (note). 450 (note). 
XIII.- 54, 439, 440, 453. 467. 468. pp. 240, 241. 
Appointments, Future — see Staffs, Future and New Appointments and New Entrants. 
Assignment of Insurance Policy to Nurse — ^p. 204. See also Insurance Policies. 
Asylums — p. 203. 

Asylums Officers' Superannuation Scheme— 124, 156. 160, 164-167, 341. 362, pp. 181 (3), 200. 220. 
Atlas Assurance Company — p. 212. 

Bank Pension Schemes— 56, 337, p. 200. 

Belgium, Civil Service Pensions — 337. 

Beneficiaries, Contributions to Cost of Pensions — See Pensions, Contributions to Cost by Beneficiaries. 
dho Pension Schemes, Cost of and Contributions to Pension Funda 

Benefits, Supplementary — 133, 344. 

Board of Education— 35, 177, 268, 269, 269, 270, 274, 276, 280, 337, 486, p. 234. See also under 
Committees. 

Board of Trade — 143, p. 248. 

Bonuses and Profits— 70, 71 (note), 260, 280, 294, 298. 396, 414, 417. 419, 426, 476, 477, pp. 203. 
235, 236. 237, 248. See also Surpluses. 

Brabrook, Sir E., Minority Report of Courtney's (Lord) Commission, q.v. — 140. 

Breakdown of Health — see Disablement and also Retirement. 

Byrne. Sir William P., K.C.V.O.— 63. 64. 144. 160, 167. 

Caledonian Railway Fund — pp. 250, 251, 253. 

Canadian Government Employees — ^p. 212. 

Cancer Hospital. Pension Scheme — 6. 13. pp. 200. 201. 

Pension Scheme for Nurses — 73. p. 201. 

Cash Endowment on Retirement — 378. 

Central Body for Hospital Pensions. Suggested— 119. 160. 161, 246, 376. 382, 383, 399, 403. 405. 48 . 
pp. 182 (11). 183 (15). 

(Disablement benefit only)-486-488, 442. 448, 449-458, 459-460. 463. 466, 468. 486. 489, 

pp. 182 (9-11), 183 (16). 233-244, 250-260. 

Central South African Railways — pp. 212, 218. 

Chairmen of Hospitals — 63. 

Cheyne Hospital, Pension Scheme for Nurses — 73. p. 201. 

Children, Provision for — 194, 306. See also Dependants: Family : Orphans. 

Civil Servants— 145, 339. p. 236. 

Civil Service Pensions— 9. 14. 15. 23. 36. 39. 63-66, 74-76. 110. 124. 126, 185-147, 148. 167. 160. 
171, 173, 179. 194. 214. 242. 263-266. 337. 339. 341, 368-369, 378. 416. 418-424. 
450 (note). 486, pp. 181 (3), 200, 220, 236, 252. See also Acts of Parliament. Civil Service 
Superannuation Acts. 

Civil Service Pensions Abroad (Belgium, France, Germany, Holland. India) — 337. 

Clerical, Medical and General Life Assurance Society — ^pp. 234. 236 (Bonuses on With' Profit 
Endowment Assurances). 

College of Nursing— 106. 302. 



INDEX. 



2I>3 



Colling, Mr. F. L., F.1.A.-319, 338, 364, 426. 441-451, 453-455, 457. 459, 463, 467. 491, pp. 234, 253- 

254, 255. 
Commercial Union Assurance Company, Limited — 296, 319 (note), 321, pp. 235, 243. 

Commissions : — 

Civil Establishment, Royal Commission on, 1886 — 143. 

Civil Service Superannuation, 1857 — 137, 138, 140, p. 220. 

Courtney's (Lord) (Royal Commission on Superannuation in the Civil Service) — 35, 53, 55, 139, 
140, 142. 143. 145, 147, 339, 485. 

Committees : — 

Board of Education. Advisory Committee — 258. 269. 270. See also Board of Education. 

Board of Education (Departmental) on Superannuation of Teachers (1914)— 258, 272-280. 283, 

337. 409. 
Deferred Pay Committee — 144. 

Home Office (Departmental) — Reformatory and Industrial Schools — 279-292, 475. 
House of Lords, on Metropolitan Hospitals — p. 203. 
Joint Committee on Universities' Scheme — 417. 

New South Wales (Departmental) on Proposed Superannuation Fund — 303-305, 310. See also 
New South Wales Proposed Superannuation Fund. 

Railway Clearing— 229. 232, 234, 235, 239. 

Select, on Asylums Officers' Superannuation Bill — 160. 167. 

Select, on Paddington and Poplar Bills re Pensions — 175. 176. 

Southwark's. Loi-d. (Departmental) on Railway Superannuation Funds (1908) — 149 (note), 179, 
218-228, 234. 245, 340, 382, 384. 385. pp. 250, 251, 258. 

Standing, of London County Council — 182. 

Relating to Hospitals : — 

Executive Committee of King Edward's Hospital Fund for London — 1, 3. 112. 118, 363. 365, 437. 
480. 485, 488, 490. pp. ii. 182 (9). 

Hospital— 3, 4. 6, 12. 15, 63, 96, 100, 101. 116, 117, 245, 405, 428. 481, 483, 484. 

House (of Hospitals) — pp. 201. 204. 

Proposed, to report on Pension Scheme for Young Nurses — 105, 106. 

Sub-Committee of Executive Committee of King Edward's Hospital Fund for Loudon — 1-3. 
481 et seq., pp. ii, 180 (1), (3), 237, 239, 242, 250. See also Conclusions and Recom- 
mendations by Sub-Committee. 

Suggested Local Superannuation, at Hospitals — 484. 

See also Central Body and Conference. 

Conclusions and Recommendations by Sub-Committee— 105, 118, 115, 118, 374, ^78, 470, 478 W ^.. 
pp. 180 (8), 181 (6), 188 (15), 184 (16). Sec also reference under Committees. 

Conference, proposed, of Hospital Representatives — 106, 481. 485. 490, pp. 180 (1). 184 (16). 

Contributions by Beneficiaries — 840-350. 

See also Pension Schemes. Contributory or Non-Contributory, and Pension Schemes, 
Cost of and Contributions to Pension Funds. 

Return of, on Ceasing to Hold Office— 161, 166, 178, 230, 244, 270. 282, 287, 305. 360. 416. 

pp. 215, 222, 226, 229, 230, 252. 

Return of, on Death — see Death. 

Convalescent Homes — p. 203. 
Cornwall, Sir E. — ^p. 221. 
Courtney, Lord — see Commissions. 
Customs Department — 55, 147. 

Death Benefit— 119, 123. 139, 143, 194. 258, 260, 261, 315, 321, 836-839, 359. 378, 380. 388. 389, 391, 
399. 411, 416-427. 432. 443-445, 461, 462, 467, pp. 181 (7), 182 (9), 237, 238, 240. 

on Disabled Lives, Extra value of — 444. p. 238. See also Mortality of Disabled Pensioners. 

Return of Contributions on Death— 67. 178. 194, 230, 244, 270. 282. 287. 338, 339. 360, 391, 

399, 416, 422, 425-6, pp. 215, 216, 222. 226. 229, 230, 252. 

Deficits in Pension Funds— 130. 131, 160, 187, 188, 190, 202-206, 217, 220, 231, 233, 235, 240. 945, 
246, 256, 332-354, 380, 381, 386, 390, 394, 476, 479, pp. 219. 221, 225, 232. Ste aia» 
Actuarial Calculations. Investigations and Valuations. 

Dependants. Benefit for — 145, 336-340. 443. 445, pp. 236, 239, 240. See also Children: Family: 

Orphans. 
Depreciation of Investments and Securities — see Investments. 

Disabled Lives. Maintenance of Policies on — 441-463, 465, pp. 182 (9), 238-244, 256-260. See also 
Disablement : Insurance Policies : and Mortality of Disabled Pensioners. 



i 



2H4 



D18ABLBMEMT, Ill-Health, etc. 



INDEX. 



Benefit and Pensions-At London Voluntary Hospitals, Under Existing Piovision-H. la 21, 94, 
jyo, dUl, dyi, 4do, pp. 201, 202, 206-208. 

^UT^^q" Q^Q« "q^S'IS^SP^^^^ Suggested Schemes-llO, 151, 242. 245. 314, 316. 

f?i' iftfi ^I^ ^' ^^.l\^^S' 1^' ^^^' ^-^' ^^' ^08. 428 470. 472, 474. 476, 
478, 486, 488-490, pp. 181 (7). 182 (8)-(10). 184 (15). 209. 222, 223, 228, 231-244. 
250—200. 

^q^m^' ^fo'^ioft ?A.? ijS'^TA-oi^^oo^'*^' ^^^' 2^ '-21^' 222. 228, 267. 276-278. 312. 327. 

343, 385, 389, 398, 403, 404, 411, 428, 433, 440, 444, 449, 450. 

Cost of— 439-469, 489, pp. 182 (9), 232. 250-260. 

Proposed Central Body tor— see Central Body. 

Bates of— 383, 469. See also Tables, Disablement. 

" Standai-d Scale " of Pensions— 446, 447, 450, 451. 452, 454, 157. 464. 

Betirements from— At London Voluntary Hospitals— 18-21, 43, 88, pp. 206-208. 

Other Services and GeneraUy— 144, 147, 207-216, 219, 237, 245, 255, 274. 325. 327 440 

pp. 216, 244, 250-255. 

Dismissal, Befund of Contributions on-270, 305, p. 2.5. See also Contributions, Beturn of. on 
ceasmg to hold ofiice. 

Docks, Pension Schemes for— -p. 200. 

Donation Bonus Fund of Boyal National Pension Fund for Nurses— 66, 71 (note), pp. 2C3, 205. 
Dreadnought Hospital, Affiliation to Boyal National Pension Fund for Nurses— 77. p. 205. 
Duration of Life— p. 256. See also Longevity. 

Economist, Article re Annuities— p. 248. 
Elementary School Teachers — see Teachers. 

Emolument8-81, 89, 93. 99, 141, 164, 284 (note). 289, 292. 366-368. 370-372. 378. pp. 207 208 21 1 
216, 242, 243, 247, 257. • rr /. . -»«.$. 

Employer^^ Payment ^of Contributions only hy-see Pension Schemes, Cost of and Contributions to 

Guarantee by— s«« Pension Schemes, Subvention, Guarantee, Ac. 

Endowment As8urance-258, 425, 426, 443. 461, 462, 463, 467, pp. 237, 238, 240-243. 

Assurances. Double- -339, 441. pp. 236, 237. 

■ of Motherhood— 312. 

English Life Table, No. 6—394. 
No. 7—394. 

Equitable Life Assuiauce Society, Bonuses on With Profit Endowment Assur»nces-p 216 
Exchequer— 259. * 

Existing Staffs— ««« StaflFs, Existing. 
Expen.es M^Ma^age^ent^of^e^^^^ Cou.p.„ie,-248. 260. 266. m. 301. 

Family. Provision for-305. 312. 336, 339, 378, See also Dependants : Orphans : Children 
Federated Schemes. Special Problems ot—see under Pension Schemes. 

System of Superannuation for Universities— «ce Universities. 

Federation with Boyal National Pension Fund for Nurse8-«w Hospitals. Affiliated. 

Fmances, Hospital, Derangement of, by Grant of Pensions— 7, 12, 48, 111, 115 p 259 

Finlaison, Mr. A. J.. F.I.A.— p. 219. 6>« aiw Government Actuarj. ' 

Flat Bate Pensions— ««e Pensions, on an Absolute Scale or Flat Bate. 

France. Civil Service Pensions— 337. 

Fraser, Mr. D. C, F.I.A.— p. 238 

Friendly Societies, Death Benefits— 337. 

Funds. Investment of— p. 256. See itho Investments. 

General Post Office— 55, 56, 147. 
Germany, Civil Service Pensions - 337. 
Government Actuary— 144, 177, p. 219. 
Government Annuitants — 392. 
1883 Experience— p. 219. 



INDEX. 2(»5 

Government Annuities— 280, 395. 397. 

Government Securities — see Investments in Government Securities. 

Great Central Bailway Company— 218, 235. 

Great Eastern Bailway Fund— 218, 224. 

Great Northern Bailway Fund— 218, 220. pp. 213, 215, 250-253. 

Great Western Bailway Fund— 218, 220. 

Guarantee. External — see Pension Schemes, Subvention, Guarantee, etc. 

Guy's Hospital, Pension Scheme — 6, 13, pp. 200, 201. 

Pension Scheme for Nurses— 73, 76, 77, 83 (note ii), 108. p. 201. 

• 

Hamilton. Lord Claud— 232, 234, p. 219. 

Hardy. Sir George F., K.C.B., F.I.A.— 440, 451, pp. 236, 250-254. 

Hardy. Mr. R P.. F.I.A.— 232, 386. 

Heath. Sir Thomas- 55. 

Heathcoat, Messrs. (Tiverton), Pension Fund. — p. 215. 

Holland, Civil Service Pensions— 337. 

Home Office -53, 167, 177, 285, 286.290. 

Hospital for Consumption, Affiliation to Boyal National Pension Fund for Nurses— 77. 

Hospital Funds of London— 9. p. 181 (5). See also King Edward's Hospital Fund. 

Hospital Nursing Staffs— «c« Nursing Staffs. 

Hospital Officers— 1, 2, 7, 9, 16, 60, 62. 74, 98, 99, 115, 117. 133, 158, 168, 241-248. 262. 263, 293 
301. 347. 412. 418, 482, pp. 180 (1), 181 (3). 183 (14), 200-21 1, 225, 254. 

Type Case No. I, Beference to— 263, 266, 357, 364, 419, 425, 430, 446, 450, pp. 231, zxx. 

«39-«45. »54, 255- 

Type Case No. II, Beference to-263, 266, 364, 419. 425. 446-450. pp. 231, 233, 239-245. 

»54- 

Type Case No. Ill, Beference to— 263, 266, 364, 419, 425, 446 450, pp. 231, 239-245. 254. 

Hospital Officers, Incorporated Association of— 2, 4, 6, 7, 15, 25, 47, 48, 87, 109, 110, 116, 117, 125 126. 

160, 151, 168. 241-248, 260, 263, 264, 266, 336, 338, 340, 347 (note), 391, 421. pp. 180 (3). 
182 (9), 200. 

Case submitted by — 6, 100, p. 200. 

Midlands Branch— 348. 

Pension Scheme submitted by, pi-epared by Mr. H. W. Manly, F.I.A.— 116, 125. 218 225 

235, 241-248, 252, 266, 320, 381, 421, 425, 426, 446, 447, pp. 200. 209. 

Suggestions, Alternative, submitted by— 116, 117, 150, 151. 

Hospital Bepresentatives, Conference of— sc« Conference of Hospital Bepresentatives. 
Hospital Schemes— ««« Hospitals, with Pension Schemes. 
Hospitals (For further references see under name of Hospital) : — 

Affiliated to Boyal National Pension Fund for Nurses— 65. 68-9, 72, 77. 82. 83. 86-92. Set alto 
Boyal National Pension Fund for Nurses. 

Analysis of Betums of Staflfs— 113. 368, 369. 

Central Body, Suggested— «ee Central Body. 

Disablement of Officers — see Disablement. 

Larger Hospitals— 12, 13, 36, 51, 119, 335. 

^'^If/i yPin^te^";!' ^' ^' ^^' 26, 27, 52, 53, 56, 61 (note), 70, 71. 77, 105, 110. 115. 229 
^' .^P'i?7' ?3fB ^^^' ^^^' ^^^' 3^^' ^'^*' 3'^«' 379. 381, 382, 387. 397. 436. 455, 456. 
f^: f^.' ^^^' ^7^' ^7^' ^^ <*°^ »^'«)' ^^' ^6. 487. 489. 490. pp. 182 (9) (11). 183 (12) 
(13) (15), 200. 206. 211, 225, 232, 238, 254, 256-J60. 

Provincial— 27, 485. 

Betirements, Eflfect of. on efficiency — 456. 

Salaried Officers— ««« StaflFs (Hospital and other)— Salaried. 

Smaller Hospitals— 2. 4, 6, 37. 49, pp. 200, 259. 

With Pension Schemes-4, 6, 7. 11-19, 22." 31, 36, 40. 51. 52, 72, 81-97. HO. 148-151, 335, 
pp. 180 (3), 200, 20I, 202, 206, 207. 

for Nurses-6. 72-88, 108. 148-151. pp. 201, 207. 

Without Pension Scheme8-4, 7, 11, 15, 20-24. 40, 42. 43, 47. 51. 52, 57, 72. 81-97 Ua 
pp. 180 (3). 206. ^ 

Without Pension Schemes for Nurses— 72, 80-90. 
Ill-health— Me Disablement and Sickness Benefit. 
Incapacitation — see Disablement. 



i' 



1 5 1'.' 



» ■, ^ 



■ 



I: 



2^^ INDEX. 

Income Tax, Increased rate of— 414. 

on Interest Income, — pp. 2ti, 237. 

on Pensions — 9. 

Incorporated Association of Hospital Officers— s«« Hospital Officers, Incorporated Association of. 

Indian Covenanted Civil Service Pension Fund— 337. 

Industrial Schools, Officers of- 279-292. See aho Reformatory and Industrial Schools. 

Inland Revenue— 147. 

Insurance Commissionera, Life Table, 1909—394. 

Insurance (^mpanie8-^-70. 106. 132. 249, 252, 260. 261, 275, 280, 291, 296, 298-302. 319 (and note), 

?«?' ^««' ^il"^^^' ^?^^'^^' ^^^' ^^' ^^^' ^13-415, 417, 422, 426, 428. 435. 444, 459. 474 
481, 486, 487. pp. 180 (I), 181 (7). 182 (9) (10) (11), 183 (15). 200. 235, 2^6, 237. 248, 

Insurance Policies and Insurance Scheme for Providing Pensions— 267 274 276 277 278 fi7{l 410- 
435, 441-448, 45^460, 462. 465. 470-477. 481-487. 489, pp. 182 (9),' 203', ao^ 222,731 
234, 238-240, 242, 256-258. \ y. .J. 4. », *3'» 

Interest, Fluctuations in Future Rate— 130, 246, 255, 325, 477. 
Interest Income — 473, p. 252. 
Interest on Policy Moneys — 422. 
Invalidity — see Disablement. 
Investment of Sui-plus Funds — p. 256. 

Investments, Depreciation and Changes in Value— 246, 255, 256, 280. 325, 389. 399. 410 414 
440, 476, pp. 234, 248, 257. • • 

King. Mr George. F.I.A.-4. 55. 228. 232. 245, 249. 294. 300, 326. 386, 391-395. 397, 401, 407, 408. 
47 J. 487. pp. 212, 219, 235, 250-253. 

King Ed^g^j-g Ho^^^^^^^^ !S ^^^1^^260 ~^' ^' ^' ^^^' ^^^* "®' ^^' ^^^' *^^' ^^' ^^' PP- "• ^^^ <^^' 

King's College Hospital. Affiliation to Royal National Pension Fund for Nur8es-77. p. 205. 

Knox, Sir Ralph, Minority Report of Courtney's (Lord) Commission. q.v.-140. 

Labourers — 288. 

Legal and General Assurance Society— 261, 263, 296. 

Bonuses on With Profit Endowment Assurances, pp. 235, 236. 

Leveaux, Mr. A. M.. F.I.A.— 146. 179. 

Life Assurance— 145. 339, 477, p. 234. See aho Insurance. 

Local Government Board- -175-177, p. 220. 

London and North Western Railway Fund— 218, pp. 250, 251, 253. 

London and South Western Railway Fund— 216, 218, 222, 386, * p. 216. 

London Assurance Corporation— p. 212. See King, Mr. George, F.I. A. 

London Brighton and South Coast Railway Fund— pp. 250, 251, 253. 

London County Council— 182-193, 313, 314, 332, 341. p. 181 (8). 

^408^^'!*''''" ^""^ Provident Fund Scheme. 1907-176. Ig^l92, 198, 206, 217, 332, 380. 394. 
London Hospital, Pension Scheme -6, 13, pp. 200, 201. 

Pension Scheme for Nurses— 73, 75. 87. 93. p. 201. 

London School Board (Officers) Fund— 183 190 

'^''''''%^^^'%r^s!!t^^t^\±^i,^:^: ^^' ^1- ^; --3H 3«T. «6. .0. m. 

M'Lauchlan. Mr. J. J., F.F.A.— 137, 386. pp. 250, 251, 253. 
Manchester Corporation Provident Fund 182 

Medical Examination— pp. 234, 237, 239. 

Medical Staft's— 14, 367, p. 210. 

Metropolitan Asylums Board — 161. 

Metropoliton Bo..xi of Work8-171, 190. 6« aUa London County Council 

MetropolU^ ^„ugh F^d. ^ 8ch«m.*-54. 124. M9 (not.,. ,71-181. 191. 198. 206. 331. 340. 

Metropolitan Police— 160. 



I 



I 



INDEX. :iB7 

MiohelU. Mr. P. J., C.M.G.-4. 

Middlesex Hospital, Pension Scheme— 13, p. 202. 

Pension Scheme for Nurses — 73, 75, p. 202. 

Midland Railway Fund — 218, 220, pp. 250, 251, 253. 

Migration, Effect of, on length of Pensionable Service— 6, 7, 25 37, 57, 89, 94, 104, 111, 115, 148. 150, 
168, 173, 258, 270, 273, 371, 378, 410. 467. 474, 482, 485, pp. 181 (3), 200, 209, »22. 234- 

Ministry of Pensions — 177. 

Money Purchase Principle — see Pension Schemes, Money Purchase Principle. 

Motherhood, Endowment of^337. 

Mortality-.187, 215. 237, 238, 246, 255, 257, 293, 294. 302. 307, 316, 325, 326, 392-394, 406-40B. 414. 
433, 440, 442, 476, pp. 216, 219, 222, 223, 232, 238, 239. 

Improved, in England and Wales— 187, 237, 238, 394, 397. 406-408. 

: — of Disabled Pensioners — 215, 433, 442-445, 461, 467. pp. 213, 215, 216, 238-240, 25a 

of Nurses— 294, 302, 392-394. 

See also Longevity. 

Mowatt, Sir Francis, G.C.B.— 53. 143, 144. 

Municipal (and Shire) Employees (New South Wales) — 303. 

Muhicipal Pension Schemes— 157-193. 253-257. 273-292. 303-312, 352. 

Mutual Principle, Rejection of -478-480, pp. 181 (8), 182 (11), 188 (18-15). See also Pension 
Schemes. Mutual Funds. 

National Debt— 169. 

National Debt Commissiouei's, Payment of Contributions to — 253. 280. 

National Health Insurance — 216, 278, 343. pp. 221, 260. 

Newman, Mr. P. L., F.I. A. —Estimate of Cost of Civil Service Pensions compared with Salaries — 54- 

Estimates compared with those of Mr. Leveaux — 179. 

New South Wales, Disablement Experience — p. 255. 
— ^— Government Railways and Tramways — 307. 

Proposed Superannuation Fund— 808-812, 316, 327. 333. 337, 341, 349, 362, 364, 388. 

898,899. 
New Zealand Government Supbeannuation Funds— 176. 194-215, 217. 331. 337. 341. 353. 359. 

363. 380, 433. 
— Railway Service (1903)— 194, 197, 200, 208, 211. 213, 214, pp. 250, 251. 

Teachers (1906)— 194, 197. 200, 208, 211. 213. 214, pp. 250, 251. 

All other Permanent Public Servants (1908)— 194. 197. 200, 208, 211, 213, 214, pp. 250. 251. 

North British and Mercantile Insurance Company — ^261. 

North Eastern Railway Servants' Pension Fund — 218, pp. 215, 250, 251, 253. 

NUBBES : — 

Female, exempted from Compulsory Contributions to Poor Law Officers' Scheme — 163. 

Institute, Private — 61 (note), 75, 76, p. 202. 

Marriage of — 105. 

Matrons, Sisters, and Staff, and Certificated Nur8es_59-99, 108, 250. 297. 302. 368-369. 371. 

378, 467, 487, pp. 201-205, 207-210, 235, 245. 

Mortality among Retired— 294, 302, 383, 392-394, 487. 

Private— 58, 61. 63-68. 94, 97, 100, 104, 105. 

Probationers — see Younger Nurses. 

Recommendation as to Young Nurses — 105-108, 878. 

Younger Nurses in Training— 58-63, 69, 78, 95, 96. 98. 100. 101, 104, 105-108, 250. 270, 303. 
368, 378, 485, pp. 205, 209, 260. 

See also Nursing Staffs. . - ^ 

Nursing Homes — p. 203. 

NuuHiNu Staffs: — 

Existing provision for — ^72-104, pp. 201-203, 205, 207, 208. 

General conclusions as to— 96-104, 115, 878. 

Pension Scheme for— 108, 115, 878, 383, 466. 481, 487. 

Do. do. Young Nurses— 105-106, 250. 878, 485. p. 260. 

Pensionable Salaries and Emoluments, estimated— 247, 364-372, 383. 466. 

Proportion of Permanent Elmployees — 60-63, 163. 

Special Features affecting— 6, 7. 58-72, 108. 163. 276. 383. 487. 

(See also Nurses aiid Royal National Pension Fund for Nurses.) 




I 



268 



i 



TNDEX. 



<( 



Old Age Pensions— stf« Pensions, Old Age. 

Orphans' Benetits-US, 307. 308, 31t>. 337. p. 236. See also Children : DependanU : Eamily. 

Paddington Green Children's Hospital. Affiliation to Koyal National Pension Fund for Nur.e— 77. 

Parlian,ent-9. 53. IGO. 172. 206. 306. 331. 332, 352. pp. 181 (3). „.. See also Acts of Parliament, 
rart-time liimployees ni Schools — 288. 

Pensions : — 

Adequacy of. or Inadecjuacy of-7, 38. 49. 111. 115. 320, 378. 416-427. 457, p. 180 (3). 
Contnbutions to Cost by Eniployei-s— aS, 175 248 334 344 S4q Vil «i7fi aqo c i « • 

Schemes. Cost of and Contentions to fusion Funds ' ' ' ^^®' ^^^' ^ ^'"^ ^"^'"^ 
Contributions to Cost by Beneficiaries— 54, 76, 840-35a 376 384 'W9 m^ iaq c i 

Pension Schemes. Cost of and Contributions to^^ Fundf^* ' ' ^^' ^ ^''^ 
Cost in respect of Past Service-357 et seq. See also Sei-vice, Back 

'^'^IntedrPe'nlLl.^"'^-'^^^ ''>- «^ Salary Percentage Plan and Proportions of Salary 

^m1^r485.°'p' mut ^""^""^"^^^^'^ "-^' ^9. 110. 139. 140. 270, 276. 322. 334. 337. 344. 
Free Pensions — 347. 

General Keferences-6 14, 16-22. 54. 81. 87, 89. 105. 109-111, 122. 125 127 177 193 296 'MIS 
p. 200. -SVjc a/«o Civil Service Pensions. • ^^-^^ ^-w, 1^/. i/Mya, 295. 308 

Ministry of — 177. 

Old Age— 124. 135. 152. 216. 249, 330. 343. 
On Disablement— 6CC Disablement. 
Payable at age 60 instead of 65, Note on— p. 231. 

^"^^rl^ .°^ Salar>'_440. 446. See aho Pension Schemes, Salary Percentage Plan and 
Proportions of Salaiy granteil as Pensions. ^^^ i^erceniage run and 

Specinien-^Officers of Reformatory and Industrial Schools— 

For Males entering the Scheme at ages 25, 30 and 40— p. 246. 

For Females entering the Scheme at ages 25 and 30— p 246 

^""^ lcheml^p^r4T''^' "' '"'''''" '"^ *"^ ^ ^''*'' ^^ "«' "' **•'" ^^ commencement of 
Staudaid Scale of. on Di8»iblement-«ee Disablen.ent. - Standard Scale " of Pensions 
Supplementary free - 284, 285, 290. 

Supplementary, on Disablement— see Disablement, Cost of. 
Pension Schemes: — 

Absolute Scale or Flat Kate— 124, 152, 216, 240, 379, 467, 

Administration of Fund-118, 119. 150. 245, 399. 401. 403-405. 410. 412. 456 471-476 

at^'S^^rp'^'o''"'^^^^^^ ''' ''^' ^'^' '^^' '^'' '^^' ''^' '^' 1^2 ("^*«)* 248. 279. 
Cost of and Contributions to Pension and Annuity Funds-and ProporUon of to Salaries- 

^* 391-397.^°ip"^2^04 fj^'P''^^' ""^^'^ ^^•^'•"K Provision-53-^7. 67. 78. 92, 293-302. 

SH?"" qftQ qS?^?m ?J!F!nl^:n^o^^-2*^' ^^1' ^31-334. 388. 340-350. 351-378. 380 384- 

4821487 • 489"'^ri; 'iV^^' '^' '''' ''^' '^«' ^2'^-^^7, 429-432. 437. 440-446. ii?^. 
4OJ40/. 489. pp. 209-211. 222-233. 234-244. 260. ^^ 

Other Services and Generally. 53-57. 127, 130-132. 143 144 146 166 168 lfin_ift7 ifto 
172-205. 219-249. 251 253-2^. 303-321. 3^-334 338 340 343 347^^ 
358-363. 384-387. 389, 390. 398, 440 up 181 %) 182 7q^" t.. I' ^' ^*' 
Seeal.0 Contributions by Beneficiarie;rCon?ribu\Ls Vtl ^o .' on'S^tg"t^' Hoki' 
Office; and Death. Return of Contributions on. v.««ing w now 

Death Benefit— «<•« Death Benefit. 
Deficiencies- Causes and Remedies— 130. 
Do. Margin for Contingencies— 131. 

{For further references see Deficits in Pension Fund.) 

Definite Pensions or "Money Value" Fund nn *!«•,.« v-- „;. o • « 1 

Purchase Principle. i?und-pp. 215. 218. See also Pension Schemes, Money 

Disablement Benefit— ««<? Disablement. 

Effect of Improved Conditions of Life and Health -237; See also Mortality. 

Existmg Officei-8. question of including—361-377. 378. See also Staffs, Existing. 



INDEX. 



:ffi9 



Pension Schemes, continued : — 

Federated Schemes. Special Probleujs of- 119, 133, 150, 151. 22H. 229. 240. 245. 259. 268. 295. 
327, 339. 382. 401-405. 412. 428. 435-438, 473. 
See also Migration and Central Body. 

Financial Provisions of State Schemes — 169. 

Fixed Pensions Fund — p. 214. 

For Hospital Officers, under Existing Provision — see Hospitals with Pension Schefnes. 

. Suijgested- 105, 115-117. 378. 481-490. See also Hospital Officers. Incorporated 

Association of, Pension Scheme submitted by ; and Tinner. Mr. Thomais. F.I.A., Scheiu* 
submitted by. 

Guarantee. External — see Pension Schemes. Subvention. Guarantee, etc. 

Insurance Policy Method — see Insurance Policies, &c. 

Method of Financial Provision — 

• Wholly "in Arrear" or "By Assessment "—122, 124-126, 128, 129, 13&-152; 180, 253. 
pp. 181 (7), 252, 253, 257, 259, 260. 

Partly " in Advance " and Partly " in Arrear '—119, 124, 130, 153-216, 217, 377, p. 181 (7). 

Wholly " in Advance "—116, 119, 122, 124, 126, 127, 130, 144, 180. 193. 217-327. 32&-33S. 
351. 380, pp. 181 (7), 257. 259. 260. 

Money Purchase Principle— 124, 125, 132, 216, 222, 223, 245, 252-827, 333, 350, 356, 357. 362. 
388-477, 482, pp. 181 (7). 222. 224. 225. See also Pension Schemes, Definite Pensious or 
" Money Value " Fund. 

Mutual Funds— 65. 127. 184. 230. 245. 252, 253, 255, 262, 268, 280, 291, 300, 315, 323, 325, 327. 

338, 339. 385. 388. 395, 401. 405-408. 428, 440, 471-480, pp. 181 (7) (8), 182 (11). 

183 (13) (15). 222. 234. 235, 237, 238. See also Mutual Principle. Rejection of. 

Nm-ses in Hospitals— se« Nursing Staffs. 

Objects and General Principles of. for Hospital Officers— 115, 119. 273. 337. 378, p. 236. 

Produce changes in conditions on which calculations are based— 160, 233, 476. p. 223. 

Provident Fund— pp. 212, 216.* 

Salary Percentage Plan and Proportions of Salary granted as Pensions— 14, 16, 18. 20-23 ^0 
41,42,44,46, 51-55, 74. 75. 81, 83. 85, 86. 87, 89, 110. 115. 119, 123, 12*. 125. 'l31* 
136-151, 154-215, 217-248, 251. 255, 264, 265. 279. 282-284. 286. 304. 317. 320, 344. 349* 
350, 364. 357, 360, 361, 363, 379, 380-387, 406, 423. 424. 438. 440. pp. 181 (7), 200, 201! 
202, 209, 216, 217, 218, 222, 223, 240, 252, 255. See also Salaries as Basis of Benefit. 

Security for Benefits— 12, 38, 115, 126-133, 149, 151, 245, 246, 252, 280, 300, 302, 305, 312. 3i5. 
364, 378, 381, 391, 395, 397. 401. 407. 408. 410. 411. 413-415, 475-480. 485. 

See also Deficits in Pension Funds : Investments. Depreciation of : atul Pension 
Schemes, Subvention. Guarantee, etc. 
Subvention. Guarantee, etc.. External— 129-132, 158, 160. 162. 166. 185. 186. 190, 196-203 •»17 
221. 223. 224. 232. 234. 235, 239, 255, 259. 268. 275. 280. 305, 312. 327. 335. 353. 374* 381* 
386. 392. 410. 413-416. 475-480, pp. ii, 182 (8) (11) (12), 183 (13)-(15), 238. 

, for Disablement only— 385. 404, 42a-434. 436-440, 449-469, 489. 490, pp. 182 f9V-fl2» 

183 (13) (15), 242. 256-280. ^^ ^^^ ^' 

, for Existing Staffs only— 187. 193. 285. 286. 371. 484. 

See also Central Body. 

Police Officers— 124. 157-160, 168. 341. 352. 

Policies, Insurance — see Insurance Policies. 

Poor Law Officers— 124, 156. 161-163, 164, 165. 168. 173, 341, 352. pp. 200, 220. 

Post Office Annuities— 249, 280. 

Pensions -55, 56, 147. 

Poplar Hospital, Pension Scheme for Nurses— 73, 75, p. 202. 
Profits in Insurance Scheme —sec Bonuses and Profits. 
Promotion — see Migration. 
Public Trustee— 280, 281, 291, 406. 

Queen Charlotte's Lying-in Hospital, Affiliation to Royal National Pension Fund for Nurse*- 77 
p. 205. 

Railway Clearing System Superannuation Fund— 227, 229-240, 245, 246. 302. 326. 327, 358. 381 388. 
394.401.403.404.408,473.476. pp. 250-253. 2 58^^ . . . . . oc«. 

Valuation Results, Deficits— 231. 233. 235, 236, 239, 240, 245, 246, 381. 

Do. do. Surplus— 232, 236. 

Railway Cferks Association — 222. 
Railway Companies without separate Pension Funds, Provision for— 229. 



I 

r 



P V 



n 



1 



270 



INDEX. 



Bailway Funds : — 

Hardy's, Sir George F., Tables of— 440, 451, pp. 250-254. 

Southwaik's (Lord), Committee on, 1908— *tc Committees. 

Superannuation Schemes-217. 2ia-240, 245, 246, 262, 268, 337, 341, 353, 380, 381, 384. 386. 
387, 440, 449, pp. 200, 213, 250, 253 256, 258. 

Kailway SaJaried Services, ^st of Pensions compare<l with 8alarie8-54, 57. See also Pension 

ISchemes, Cost of and Contnbutions to Pension Funds. 
Becommendations and Conclusions by Sub Committee- lOS-1 18, US 118. »74 »78. 4m 47a 

et seq. pp. 180 (8), 181 (6). 188 (16), 184 (16). sTal^refel!ice:nu1e7S>m^ *^ 

Refonnatory and Industrial Schools, Officei-s of— 279-292. 304. 342. 361, 388, 406 409 p 216 

^''"'^Z-,^!^[ll:^fZ,2:^^.. „r"'S '''"'•'°" ^''*"'~- ^' °' -^ ^»'"'"'«''- 

, Ketirem^^na. m 147. m 240. 339. 424. 456. pp. ,00. ,o6-.o8, .,3. ajj. «38. .40, .44. .54. 

**°;!'"iS;«?' *^' *®' **• ^- "^-"''- l^^' 219. 227. 287. 323. 325. 363. 403. 421, 446, 486, 
pp. J80 (d), 201, 202, 222, 223, ' 

Average Age at, of Existing Pensioners of Hospitals— 40, 41-46. 

3>t). do. Nurses— 88. 

Compulsory — 14, 424. 

^""^i A^i^' ^^\^'^'o!^\3P' ^^' ^^2. 245, 267. 276. 295. 305. 307. 316. 321. 327, 398. 399, 
l^bltmen^ ^^^' ^^^ ^^^' "^' '"'"^ "«' '^'» *4^' '^'» '5o. 25,. 253. See also 

Lump Sum on— 141, 321, 337, 339. 

Postponed and Deferred— 39, 41, 47, 88, 111, 226, 266, 358, 402. 421-424. 487 
Kate of— 207. 208-210. 237. 245, p. 223. 
Voluntarj'— 14, 123. 
Bevei-siouary Societies — p. 256. 

Roberts, Mr. Carson. Reference to Speech at Institute of Actuaries— 176 (note), 340. 346. 854 (note) 
pp. 320, 221. \ /» 

Rowntree. Messrs., York, Pension Fund— p. 215. 

Royal Free Hospital, Affiliation to Royal National Pension Fund for Nurses— 77, p. 205 
Royal Nation^ PensionFund for Nurse,-4, 58, 64-71, 72-93, 96, 102-104. 105. 106. 119. 124. 125. 
132, 250. 270. 29a-a02, 319 (note). 325-327, 388, 891-897. 407, 485, pp. 201, 203, 205, 235! 

^''ftrim°Q^*oo?''?Sr'"' *'e^«»***»o" ^^i'h Ho8pitals-66, 68, 69, 72, 77-79, 81-88, 90-92, 

IUJ-IU8, AW, 295, 485, pp. 201, 203-205, 208. 

St. Bartholomew's Hospital, Pension Scheme- 6, 13, pp. 200, 202. 

Pension Scheme for Nui-ses— 73, p. 202. 

St. George's Hospital, Pension Scheme— 13, p. 202. 
Pension Scheme for Nurses— 73, p. 202. 

St. Mary's Hospital. Affiliation to Royal National Pension Fund for Nurses— 77. p. 205. 
Salaries, as Basis of Benefit — 

Average— 222. 423. pp. 213, 218, 223. 

Final or Terminal- 222, 227. 423, pp. 2,3, ,,6218, 223. 

See also Pension Schemes, Salary Percentage Plan. 

, Bates of, at Hospitals— 9, 248, 346, 346. 

Salary Progression— 383, p. 241. 

Scales, Hypothetical— p. 227. 

School Managers — 285. 

Schools, part time employees in — 228. 

Scotland, Widows' Funds— 337. See also Widows, Provision for. 

Secondary School Teachers— see Teachers. 

Securities — see Investments. 

Security for Benefits— se« Pension Schemes, Security for Benefits. 

Service, ^^^^' ^^^^ ^^„^^^y^ou^^7 27. 29. 31. 36, 45, 199, 201, 204-206, 244, 333 334, 351-377, 

l?;rs^?;'JSsttng:'''' ^^^ ^^ '''' ^^°' -'' -^-^ ^^^^ ^^^ '47. .55.^56.259: 

Future~193. 201. 206. 310. 324. 333, 334, 355, 371, 376. 378. 454. 468, 483, 484. pp. 242 

*55> 250, 259. ' ftr *» . 

Pensionable. Loss of, on Promotion or through Migration— «45c Migration. 

; Principle of " Aggregation " of. or " Continuous Service "-35. 168. 169. 173. p. 181 (3). 



u 



INDEX. 



271 



See aluo Disablement. 



Sickness Benefit— 66, 67, 100, 295. 301. 343, p. 204. 

Society of School Superintendents — 280. 

South Eastern Railway Company — 235. 

Southwark's (Lord), Committee on Railway Funds — see Committees. 

Staffs (Hospital and other) : — 

Chaplains — p. 210. 

Clerical — 288, pp. 209, 210. 

Dispenser — 6, 42, 263, .pp. 200, 210, 245. 

Existing— 107, 119, 161, 165, 177, 181, 183, 186, 190, 191, 193, 196, 201, 204-206, 243, 244, 271, 
278, 282-286, 289-291. 310. 311. 312. 324. 332,, 333. 334. 350, 851-877, 378, 380. 407, 
454-468. 464, 466, 468. 469, 482, 483. 484, 485. pp. 182 (9), 183 (13). 221, 232. 
841-243, 253, 255-257, 259. 

See also Service, Back, Past,' or Previous. 

Female Servants and Scrubbers— 115, 247, 288, 367, 371, 378, 466. 469, pp. 209. 210. 

Future and New Appointments and New Entrants— 119. 191, 271, 311, 332, 334, 342, 356-857, 
453-465. 464, 465, 482. 483, pp. 241, 242, 255. 

Nursing — see Nursing Sta£fs. 

Permanent— 14, 148, 251, 367. 

Salaried- 18, 21. 22, 31, 40, 43, 44, 62, 188, 189, 307, 358, 362. 364. 369-372, 383. 466, 487, 
pp. 202, 255. 

Secretaries in Schools — 288. 
Secretary. Hospital— 6, 32, 42, 44. 49, p. 200. 
Superior Officers, Pensions to— 222, 223, 226, 384, 386. p. 200. 
Teachers (School) Certificated — see Teachers. 

Weekly Wage— 7. 18. 21, 22, 31. 32. 40. 43, 45, 115. 185, 188, 189, 307. 364. 369. 370, 372. 378. 383. 
466, 469. 481, 487, pp. 210, 255. 

State, Guarantee or Subvention by — see Pension Schemes, Subvention, etc. 

Pension Schemes— 136-152, 169. 194-216. 303-312. 

Strong. Mr. W. B., F.I. A.— p. 255. 

Subvention, towards Provision for Disablement Pensions— s«« Pension Schemes, Subvention, etc. 

Sun Life Assurance Society — 261. 

Superannuation — see Retirement. 

Age — 446. See also Retirement. Age at. 

Rates of — 316. pp. 222, 232. See also Retirement, Rate of. 

Superannuation (Metropolis) Act — see Acts of Parliament. 
Surpluses — 232. 236, pp. 225, 248. See also Bonuses and Profits. 
Surrender Value of Insurance Policies — se£ Insurance Policies. 
Sutton, Mr. W., F.I. A. — ^p. 219. See also Government Actuary. 

Tablbs : — 
Age- 
Age, Average, at Retirement, of Existing Pensioners in Hospitals — 40, 82. 
Age and Ill-health, Retirement from, in certain Government Departments — 147. 

Ages to which Retirement must be deferred to secure certain Pensions under the Univorsilies 
System — 423. See Universities, Federated Superannuation System. 

Disablement — 

Cost of Disablement, Type Cases of Existing Officers with Salaries, as shown m 
Appendix X, 

in respect of Future Service— p. 242. 

in respect of Past Service — p. 243. 

Cost of Disablement in Type Case No. 1 — p. 255. 

Relation of Disablements to Existing Staffs at age 60 — ^p. 253. 

Specimen Disablement Pensions — 446, Reference 254, 258. 

See also Tables, Pensions ; and Tables Retirement. 
Emoluments — 

Arbitrary Scale for valuing Emoluments in Schools. — p. 247. 

Hospitals, London Voluntary — 

Average Age at Retirement of Existing Pensioners. Nurses— 82. . 

Pensionable Salaries and Emoluments of Hospital Staffs, Estimated — 369, 372. 



272 



INDEX. 



i* 



Tables, contimied : — 

Hospitals, London Voluntary — continued. 

Pensions paid in 1913 by Hospitals with Schemes— 16, 18, 21. 
Do- do. Hospitals without Schemes — 20. 

Do. do. 105 Hospitals— 62. 

Do- do. to Nursing Staffs— 81. 

Do. do. 99 Hospitals, Nursing StaflFs— 83. 

Previous Service in Voluntary Hospitals— 27. 

Schedule of Pensions paid at the London Voluntary Hospitals in 1913, of which particulars 
have been supplied to the King's Fund, pp. 206, 207, 208. 
London County Council — 

Comparison of Old and New Contributions required from Members of London County Council 
Fund — 188. 

Contributions to Superannuation Fund— 189. 
New Zealand Government Superannuation Funds — 

Deaths, Withdrawals, Service Pensions and Disablement Pensions— 211. 

Pensions granted and void — 213. 

Besult of Valuations of 1912 and 1913 - 197. 

Do. showing Pensions Payable, Contributions and State Subsidy— 200. 

Betirements from Disablement — 207. 

Do. do. Graduated rates— 209. 

Scale of Contributions to— 196. 
Pensions — 

Annual Premiums for a Pension of £10 per annum on a Female Life— 296. 

Do. do. do. Male Life— 261. 

Comparison of Annual Pensions provided for Annual Premiums of iBlO and Single Premiums 
of £100 respectively in Mr. Tinner's Fimd and in the •' Commercial Union " Scheme— 
P- a34- 
Comparison of Annual Pensions provided for Annual Premiums of £10 and Single Premiums 
of £100 respectively in Royal National Pension Fund for Nurses and *• Commercial 
Union " Scheme — p. 235. 

Comparison of Deferred Annuitv provided for Annual Premiums of £10 and Single Premiums 
of £100 respectively in Elementary School Teachers Fund and " Legal and General " 
Scheme — p. 235. 

Cost of Disablement Pensions (Mr. Tinner)— p. 232. 

Cost of each Double Unit of £52 per annum at age 60, Males and Females— 306. 

Pensions on Disablement in the three Type cases, assuming that the Endowment Assurances 
are all maintainetl in their entirety by a Central Bo<ly, but that the benefit already 
secured by the past contributions is reserved for the member's own estate in the event of 
his death before the Pension age of HO is reached (Revised Table)— p. 240. 

Pensions payable under Mr. Tinner's suggested scheme of Pensions on the Money Purchase 
principle by means of a Mutual Fund— pp. 223, 224, 226, 227, 228, 229, 230, 231, 231. 

Pensions purchaseable with 10 per cent, of salaries paid to Hospital Officers- 263. 

Proportion of Salary paid as Pensions for each year's service — 2(54. 

Relative Results of Experience of Different Pension Funds showing Annual Salaries and 
Annual Pensions when Funds have been in existence long enough to reach a stable 
condition — p. 251, reference 256. 

Specimen Pensions for Existing Oflioers who are between 40 and 60 years of age at date of 
commencement of Scheme— p. 247. 

Statistics of Pensions paid by ia5 Hospitals in 1913—52. 
Retirement — 

Numbers of Early Retirements through Disablement : according to th6 experience of different 

Funds— 147. 207, 209, 211, 213, p. 250. 
Salary — 

Future Appointments with Salaries, as shown in Appendix X— p. 241. 

Proportion of Final Salary for each year of Service— Office A, Office B and Civil Service 
(New Scale)— 420. 

Type Cases of Salary Progression used for illustrative purposes in the text of i\w, Report- 
(.Appendix X) — p. 245. _ 

Superannuation — 

CJost of Ordinary Superannuation in respect of past service : Tj-pe Cases of Existing Officers 
with Salaries, as shown in Appendix X — p. 244. 



INDEX. 



273 



Tables, ccntimiM— 

Superanuation — continued. 

Pensions, Specimen, proposed by Departmental Committee on Superannuation of Officers of 
Reformatory and Industrial Schools : Males and Females— p. 246. 

Teachers' Scheme — 

Apportionment of Contributions of Officers and Managers— 282. 

Universities System — 

Death Benefits payable under Universities System— Office A, Office B and CivU Servies 

(New Scale)— 419. 
Estimated Pensions obtainable at ages 60 and 65 : F.S.S.U. and Mr. Tinner's Schemes 

compared — 319. 
Lump Sums returnable on death, withdrawal or disablement : F.S.S.U. and Mr. Tinner's 

Schemes compared — 321. 
Pensions payable under Universities System- Office A, Office B and Civil Service (N< 

Scale)— 420. 
Short Summary of Pensions under the Universities System and other Plans— 425. 

Trachbbs : — 

CTertificated— 288. 

Elementary School, Deferred Annuity Fund— 105, 253-257, 270, 274, 277, 288, 325, 349, 388, 

880, 391, 448, 450, 467, pp. 219, 235, 238, 239, 241, 243, 250, 253-255. 258. 
Elementary School, Marriage of Women Teachers — 276. 
London CSounty Council — 192. 
New Zealand Government — 194-215. 

Reformatory and Industrial Schools — see Reformatory and Industrial Schools, Officei-s of. 
Secondary and Technical Schools, Pension Scheme proposed for — 105, 258, 272-278, 280. 337. 

342. 409. 
University— ««« Universities, Federated System of Superannuation for. 
Thomas, Mr. E. C, F.I.A.— 360, 363, p. 232. 

Tinner, Mr. Thomas. F.I.A., Scheme submitted by— 818-827, 350. 356, 362-364, 388, 394, 308-4ia 
425. 426. 446, 447. 450 (and note), 451. 452, 453, 467. 472, 476, 478, 482, 491. pp. 181 (8k 
222-233, 234, 235. 237, 239. 240, 250, 251, 253, 254.258. 
Trades Unions, Sickness Benefits — 1(X). 

Death Benefits— 337. 

Treasury-65, 136, 143. 177. 280, 3S9. 

Type Cases of Salary Progression— ««« Hospital Officers, Type Cases. 

Uncertainty and Lack of Unifonnity, under Existing Provision for Pensions at London Voluntar>- 
Ho8pitals-2, 7, 12, 88-48, 57, 87-92, 111, 115, 149, 485, pp. 180 (3), 200, 206-208. 

Other Services and Generally — see Pension Schemes, Security for Benefits. 

Uniformity, Lack of, in Pensions at London Voluntary Hospitals — see Uncertainty. 

United Kingdom Provident Institution (Bonuses on With Profit Endowment Assurances) — p. 236. 

Universities, Federated System of Superannuation for-124, 258-271, 274-278, 280, 281, 296, 306. 318. 

319, 321-323, 337. 339. 342, 349, 362, 364, 376, 388, 389. 409, 411-434, 439, 441-448, 453. 

465. 457. 463-465. 470, 473, 474, 482, 4a5, 487. pp. 182 (9), 231, 232, 235-237. 239. »4o. 

243. »58, 260. 

Insurance Companies granting Pensions : Office A— 418-420, 423, 425, 430, 432, pp. 239, 243. 

Office B— 418-420, 423, 431, 432, pp. 239, 243. 

Valuation Reserves — see Actuarial Calculations, Investigations and Valuations. 
•• Variable Grant " (Home Office)— 285. 

War Conditions, Effect of— 366, 414, pp. 236, 249, 260. 
War Pensions — 169. 
War Office— 147. 

Widows, Provision for— 138, 145. 194, 305-308, 316, 337, p. 236. See also Dependants and Family. 
WithdrawaU— 113, 144, 194, 212. 246. 266. 308, 315, 321, 359, 363, 364, 389, 399, 416. 440. 451. 45i 
486, pp. 204-216, 222, 230, 232, 237, 251, 252, 254, 255. 



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